Is Big Tech Putting Teladoc’s Future in Jeopardy?
In the 1930s, 40% of patient encounters with a doctor occurred in the home. By the late 1980s, house calls were down to less than 1% of all physician encounters. It would seem that telehealth could fill some of the gaps in physician access, but for years, adoption has been less than enthusiastic. A 2014 survey found that of those who took advantage of telehealth, just over 80% engaged with their physicians only once per year through online platforms. This year, the coronavirus has drastically shifted patient behaviors. Stay at home orders and the fear of visiting a doctor’s office have driven rapid adoption of telehealth offerings. Analysts expect telehealth visits to top 1 billion before the year’s end, up from pre-pandemic estimates of 36 million virtual visits.
Since 2005, Teladoc Health (NYSE:TDOC) has been using technology to bring doctors to patients where and when it is most convenient. Despite telemedicine’s historical lack of utilization, it may be critical in meeting a projected shortage of physicians in the coming decades. However, Teladoc isn’t alone in recognizing its massive market opportunity.
Teladoc’s robust revenue growth since going public in 2015 had tapered off from 90% and 80% in 2017 and 2018, respectively, to 32% in 2019. But the pandemic has made traditional office visits impossible in some areas. In turn, patients still wanting to see a clinician have pushed growth back to 85% in the latest quarter. With a service perfectly designed for a year spent at home, the company is in a strong position. But good ideas always draw competition and challengers. Investors should ask if Teladoc’s good fortune will continue or if that luck will end up being a curse, as stronger competitors are attracted to the market now that adoption of its services has increased.