The Future of Teladoc & Livongo

Kevin Perkins & Nikhil Gunderia

Several weeks ago, healthcare companies Teladoc and Livongo announced an $18.5 billion merger. Teladoc, the first public company within its respective industry, focuses on providing patients with the right care for illnesses such as the flu, appointment-free. On the other hand, Livongo’s primary goal is to help those managing chronic diseases, specifically issues such as diabetes, hypertension, and weight management. This merger valued both companies at a combined $37 billion and could be the future of healthcare as we know it.

Over this past weekend, analysts from Stifel released their updated observations about Livongo and Teladoc. In their report, Stifel outlined the impact that COVID-19 has and will continue to have on the industry, positive and negative potential synergies, and the short/long term outlook. With all of those factors in mind, Teladoc’s price target has been held at $228 until more diligence surrounding the merger is completed.

Before the pandemic, Telehealth utilization rates were way lower than current rates. From the statistics provided in Cowen’s survey from August 20th, 2020, back in October 2019, only 51% of employers surveyed offered telehealth benefits. Currently, that number has risen to 87% which is being driven by COVID-19. Employers are becoming more aware of the Telehealth benefit designs. Pre-COVID, only 23.2% of employers were “extremely familiar” with the services compared to 47% now. In addition, the “not familiar at all” cohort has decreased significantly from 8.1% to only 1%.

While Teladoc has only penetrated the US markets, Stifel analysts expect that Teladoc will grow due to the merger with Livongo. Livongo has already expanded its services internationally as they’ve established themselves within Europe and Canada. Teladoc has the opportunity to reach progressively higher utilization and is estimated to experience profitability in its revenue abroad, as well as in the US.

The Teladoc Livongo merger could be a preview for how technology is transforming the landscape of the healthcare industry. The speed, convenience, and monetary benefits provided by telehealth are unparalleled and appealing to employers. Both stocks have remained around pre-merger announcement prices and are expected to hover in that region as the uncertainty of the details behind the merger has resulted in analysts holding Teladoc’s price target.

Disclosure: At the time of publication, we have no positions in any of the securities mentioned in this article. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article. 

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