I think many investors are missing the forest for the trees when it comes to Teladoc Health (NYSE:TDOC). That’s especially the case in the aftermath of the company’s third-quarter update on Wednesday.
Teladoc’s shares fell in after-hours trading. It wasn’t because the company missed Wall Street’s top- or bottom-line estimates. Actually, Teladoc beat revenue and earnings expectations.
Instead, investors once again seem to be fretting about slowing revenue growth. But a slowdown should be absolutely expected after the COVID-19 momentum that kicked into gear last year.
Teladoc increased its full-year revenue outlook — just as it did in the second quarter. And its prospects look better than you might think. Here are three reasons why.
1. Key metrics trending upward
Let’s first acknowledge that Teladoc’s top line continues to grow robustly. The company reported revenue in the third quarter of $521.7 million. That’s an 81% year-over-year jump and an increase of nearly 4% from the previous quarter.
However, I think we should also look closely at other key metrics that indicate how Teladoc’s business is performing. And they’re all trending upward.
Most importantly, total visits rose 37% year over year to nearly 3.9 million. That total is a nice bump from the 3.5 million visits in the second quarter. Even with most lockdowns a thing of the past, people are still choosing to receive care virtually.
Utilization is also up to 23.7% from 16.5% in the prior-year period and 21.5% in Q2. Chronic-care enrollment is at an all-time high of 725,000. Similarly, revenue per member per month is better than ever.
When all of these metrics are trending positively, it bodes well for Teladoc’s business going forward.
2. A big new contract about to become effective
There are several downsides to fixating on one quarterly update. One of the biggest is that the numbers from the most recent quarter don’t reflect anything about new business that a company has won that hasn’t been realized yet.
Earlier this year, Teladoc landed a big new contract with Health Care Service Corporation (HCSC). It’s the fifth-largest U.S. health insurer. The HCSC deal is a great example of how Teladoc’s acquisition of Livongo is paying off. The big insurer will offer Teladoc’s chronic-care solutions for diabetes and hypertension to its commercial fully insured members in multiple markets.
After the agreement with HCSC was made, Teladoc Health CEO Jason Gorevic referred to it as “a landmark deal” for …….