Medicine is changing, and the Teladoc Health stock (NASDAQ: TDOC) is at the cusp of the industry transformation. Teladoc Health allows users to access expert medical advice, organise medical records, manage health risks, and enter virtual mental health appointments at the touch of a button. Teladoc Health recently acquired biotech giant Livongo (NASDAQ: LVNGO). However, TDOC fell after the announcement suggesting that the music might be slowing down. Thus, today’s article will provide our investors with a simple explanation as to why TDOC surged 200% and then fell 30%, and whether it is too late to invest.
Table of contents 1. Teladoc soars 200% in 2020 2. Why have investors sold their TDOC shares? 3. Have all the gains been made?
Teladoc Health stock rises 200% in 2020
The Teladoc Health stock rallied for three reasons: COVID-19, strong Q2 2020 earnings, and the LVGO acquisition. In the wake of the pandemic, a tidal wave of people began consulting healthcare professionals online as opposed to in person. To put the influx of customers into perspective, Teladoc’s users grew by 203% (YOY) to 2.7 million. Second, TDOC posted impressive Q2 earnings. Teladoc Health saw revenue increase by 85% (YOY) and a net loss of $0.23, which was in line with analyst expectations. Investors instantly reacted positively to revenue growth by propping up TDOC by 8%.
The cherry on top was when Teladoc announced it plans to acquire large-cap Livongo (NASDAQ: LVGO). LVGO, uses digital tools to alleviate the pain that people suffer from diabetes and other chronic conditions.
Why have investors been selling Teladoc shares?
It seems the music is starting to slow as Teladoc shares slid 23% in the past few days. Confusion spread across the market regarding how could the giant telehealth company with three strong announcements fall hard and fast.
Every acquisition draws critics. Some investors may not agree with the acquisition and cannot see how the two healthcare behemoths will compliment each other. Moreover, existing shareholders will have their ownership diluted as the LVGO acquisition will issue additional shares. The acquisition will dig into Teladoc’s revenue pocket, meaning profitability targets will likely be pushed back.
Furthermore, Teladoc’s meteoric rise attracted insiders, directors, and senior management, to sell their shares. For example, director William H. Frist sold 740 shares for 177,600 on the 31st of August. However, William still owns 6,158 shares valued at around $1,477,920. Thus, it seems insiders are selling to re-invest their profits into the growth of Teladoc.
The growing pessimism saw put options dominate call options for the beginning of August. However, the further you go along the 2020 timeline call option volume outweighs put options. Suggesting that the short-term sentiment is bearish, hence the recent fall. On the other hand the bulls own the underlying direction of Teladoc Health.
Is it too late to invest in the Teladoc Health stock?
Before I begin, I am obliged to remind our viewers that this is not financial advice but rather investment commentary from our extensive research
Short answer: A long-term investment holds the most weight. However, timing your entry is crucial to maximising your investment potential (opinion not advice)
Following the smart money is usually an excellent indictaor to use for investing. (opinion not advice). While insiders sold some of their Teladoc shares, hedge funds are buying in. For example, Profound Advisors LLC increased their stake by 812.2% by purchasing an additional 16,911 shares. Overall, hedge funds and institutions own 97.14% of Teladoc, suggesting there is a lot of smart money behind the telehealth giant.
The current trend in Teladoc screams a bearish pedant flag. Saying that we should see the bears own the short-term chart. However, all signs, revenue, call options, and market share are indicating long-term growth. Many investors see the long-term green light and are ready to push the button. YIG would like to point out that timing is a key differential between retail and professional investors. Waiting until the call option volume increases and Teladoc posts, FY2020 financials might be a great time to cement your position.
If you enjoy our article or are wanting to learn more, you can subscribe to us for free via email and get updated when we post a new article. From all of us at YIG, thank you for the support.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Here is our free, uncomplicated, and extensive ASX portfolio
Want access to free, uncomplicated, and smart COVID-19 Strategies then click below?
Written by Patrick McLoughlin, Senior Manager of YIG.