Telehealth Isn't Just for People Anymore

The pandemic has accelerated many online trends at a pace that few could have anticipated, including telehealth. Two leading investment experts and contributors to MoneyShow.com look at the fast-growing field of telehealth, both for people and, as a less-well known market, for pets. Adam Johnson, Bullseye Brief Teladoc Health is the world's first and largest fully integrated telemedicine platform, providing urgent, routine and chronic care to nearly 70 million patients in 130 countries. The company originally launched in 2002 as a videoconferencing platform intended to link patients in rural Texas with skilled doctors in Dallas, though it came of age during Covid -- leapfrogging to the forefront of public consciousness as social distancing precluded office visits. The stock's subsequent and meteoric rise has facilitated two transformative acquisitions in recent months: $600 million for patient data management platform In-Touch, and $14.3 billion for chronic-care provider Livongo, a previous recommendation of ours. Teladoc's partnership with walk-in clinics at CVS Health further extends the company's ability to reach patients en masse, one of the reasons recent guidance confirms 30-40% topline growth and 200-300 basis points margin improvement annually through 2023. Overall, Teladoc has a significant runway to grow. Large enterprise customers are the backbone of Teladoc's core telemedicine business. The company has contracted with 40% of the Fortune 500 to provide services for employees, who typically have insurance with existing carriers like BlueCross/BlueShield and United Healthcare. As a result, Teladoc has been particularly adept at showing insurers how it can ultimately cut unnecessary expenses and reduce costs overall. This is why 35 health plans and 290 hospital systems have migrated to Teladoc's platform, providing full recognition and reimbursement of services. The Centers for Disease Control estimates that two-thirds of emergency room visits take at least two hours and a third are deemed unnecessary because they are non-urgent. By keeping these patients out of the ER, Teladoc helps companies lower claims, opening a potential floodgate for patient acquisition. Employers typically pay about $1 per month per employee to sign-up for Teladoc's service, plus $25-50 per call whenever an employee needs to speak with a doctor. Teladoc estimates that corporate customers break even on healthcare costs if 3-4% of their employees utilize the service. Above 5% they begin to save money compared to traditional in-person service. The higher the utilization rate, the lower the cost per employee. For large enterprises, this can mean millions annually. Livongo catapults Teladoc into the burgeoning business for chronic care, where diabetes and hypertension alone constitute a $45 billion addressable market. Critically, Livongo's $85/month subscription saves insurers an average of $2,000 annually by reducing unanticipated hospitalizations, and provides significant earnings visibility for Teladoc. It's why Livongo's revenues are doubling, and the initial diabetes platform now covers other indications like hypertension and obesity. The company has about 225,000 members on its platform, yet 31 million Americans have diabetes and another 500,000 are diagnosed every year. If you consider the fact that 70% of diabetes patients also have hypertension, which can be managed much the same way via constant feedback monitoring, you realize that Livongo's growth opportunity is even larger. In fact, 147 million Americans have some sort of chronic disease (diabetes, hypertension, obesity, kidney failure, etc) and chronic disease accounts for 90% of healthcare spending. Get the approach right, and the opportunity grows exponentially. This is what Livongo is ultimately trying to accomplish. In-Touch Health -- the firm's second acquisition -- provides a comprehensive software platform to help doctors provide seamless virtual care. All medical records are stored electronically, providing instant access and analysis across patient groups. It's an obvious way to help doctors leverage the telehealth platform, with added interoperability to capture new patients from a website, respond to emergency consultations or compare patient statistics to meta data on millions of stored cases. I think this is where the real benefit lies -- using AI predictively to manage care before a patient's condition deteriorates or recommending preventative actions to avoid sickness in the first place. Revenue will grow 45% this year and average 30% through 2023, based on recent company guidance. If we take this at face value, TDOC currently trades at 10 times 2023 sales, which is less than where other game-changing companies traded during their early days. Specifically, they averaged 16 times sales, a 60% premium to Teladoc's current valuation. I think this multiple is justified based on the company's unique and dominant position, its 30% sales growth and similar valuations for other transformational companies. That would imply a target price of $280 per share. Tony Daltorio, Investors Alley's Growth Stock Advisory One of the few industries to boom during the coronavirus pandemic has been the $135 billion global pet-care market. The reality is that more people's working lives are now home-centered, and probably will still be for some time to come. That change makes it easier for people to have a pet, which has led directly to an increase in pet adoptions. This, in turn, led to pet owners stockpiling pet food and other pet care items. And then the pandemic forced a large chunk of pet-care sales to move online overnight. In a June survey, the American Pet Products Association found that nearly 75% of pet owners viewed their pet supplies purchases as recession-proof. That is not surprising. Pet care may not be 100% recession-proof, but pets are very much a loved part of many families. People are more likely to cut back on vacations, cars, and other items before they make changes that impact their pets. Even before the pandemic struck, the pet care industry was already growing strongly. Over the past decade, the size of the global pet-care market has expanded by an average 5.8% per year, according to the research firm Euromonitor. That is more than double the growth rate of the confectionery market, for example. In some places, the rate of growth has been even better than the global average. In China -- the world's second-largest pet care market (the U.S. is #1) -- the average annual growth rate was 20.7%! One definite winner from the pandemic pet-care boom is Chewy , an online pet goods retailer that listed on the New York Stock Exchange last year after being spun off from PetSmart. The company has been a focus of investor optimism -- rightly so, as investors search for pandemic-proof business models. Chewy's share price has risen as sales have soared, recently hitting a high above $75 after its March low of $20.62. In speaking about the pandemic's effect on his business, Chewy CEO Sumit Singh said: A growth curve that was supposed to play out over years has been played out over weeks. In effect, Chewy was at the right place at the right time. But in addition, I like that Chewy has smart management. And that it is a lot more than just an online store for dog food. Chewy has recently jumped on another pandemic-aided trend, telehealth. The pet e-commerce leader recently announced a new telehealth service, called Connect with a Vet. This first-of-its-kind service provides easy access to free veterinary counsel from the comfort of your home. So what exactly does this service do for pet parents? Connect with a Vet allows pet parents and veterinarians to use the company's proprietary tele-triage platform to have continuous, licensed veterinary care and support during the pandemic. Users can get answers to some commonly pet care questions, receive advice, and discuss concerns they might have regarding the health of their pet. They may even get referrals to a local vet or emergency animal hospital. (The vets do not diagnose medical conditions, providing treatment, or prescribe medications.) During the pilot phase of this program, over 80% of users rated the service a 10 out of 10. And this tele-triage service is free -- at least, it is for customers subscribed to the Chewy's popular autoship program. This program is responsible for nearly 70% of its net sales. Connect with a Vet was initially launched in Florida and Massachusetts in May. Chewy has now expanded it to over 35 states as its nationwide rollout continues. It is likely that a rise in pet adoption among millennials throughout the coronavirus pandemic will be a continuing driving factor powering Chewy's business model. And there is definitely more room for growing the business. After all, 37% of pet owners cited Chewy as their preferred e-commerce platform for pet supplies -- but what about the rest? Add in Chewy's new pet telehealth angle and you have a five-star stock. Buy at any price up to $80 a share.

Telehealth Isn't Just for People Anymore

A look at the fast-growing field of telehealth, both for people and, as a less-well known market, for pets.

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