Teladoc and The Trade Desk: 2 Hot Stocks
In Teladoc and The Trade Desk, we have two exciting stocks that are only beginning to realize their potential.
Sometimes a lesser-known stock can be a big winner, so we take a look at two relatively un-talked about companies which have seen their stocks make big moves in recent years.
Since the ubiquity of smartphones, a convenience economy has developed in western culture, and those companies that do not adhere to it will become obsolete. With almost everything you could want at your fingertips, people’s time and effort is coming in at an ever-higher premium. Teladoc (NYSE: TDOC) streamlines one of the most laborious errands one is dealt with: going to the doctor’s office. The company allows patients to video-chat with doctors almost instantly, bypassing waiting rooms, exorbitant fees, and scheduling conflicts. It is the founder and leader of the Telehealth industry.
For a company providing such a modern solution, Teladoc has been around a lot longer than you’d think. Set up in 2002 by Michael Gorton and former NASA flight surgeon, Dr Byron Brooks, Teladoc officially launched (pun intended) in 2005 and by 2007 had over a million members. Hiring its current CEO Jason Gorevic in 2009, it raised over $100 million in private funding before going public in 2015 with a valuation of $758 million. At the time of IPO, Teladoc boasted over 8 million members and facilitated 500,000 doctor visits that year. Since then the business has gone from strength to strength, growing membership to an impressive 22.8 million and facilitating 2.6 million visits in 2018, with the stock growing accordingly to just shy of $80 per share and a market cap of $5.8 billion, and changing US healthcare for the good to boot.
Is Teladoc a Buy?
All of this is very easy reading for an early investor, but what if you’re only just getting the memo. Teladoc’s share price grew over 13% in October. In its Q3 earnings call the company beat all expectations, announcing revenue was up 24% year-on-year with $138 million v $136.5 million expected. It posted a net loss of $0.28 per share v $0.39 per share expected. Its guidance for the full year 2019 is also promising: $546-550 million in revenue and a net loss per share of $1.43-1.49 compared to an expected $543.6 million in revenue and $1.55 net loss per share.
From just shy of $60 at the end of August to hovering around $80 as we speak, Teladoc is certainly a hot stock, but we’re looking at the long term. Is Teladoc a stock we can buy and hold ‘til we’re gray and old?
The Telehealth industry was valued at $49.8 billion and is expected to grow to $266.8 billion by 2026. With this kind of growth comes competition, and it is the one concern that I would have about Teladoc. Telehealth companies are going to become universal in the coming years. Will Teladoc’s time spent as the market leader be enough to maintain its competitive advantage? Is relying on the power of its brand and pre-established relationships enough of an economic moat in an increasingly competitive industry? Will an influx of competitors initiate a race to the bottom when it comes to pricing? These are all questions that must be addressed when considering an investment in Teladoc.
While increased competition provides food for thought, it is not enough to put us off Teladoc as an investment. It’s proven track record of beating expectations under Jason Gorevic, as well as its moves toward international expansion, bolstered by the acquisition of the French company MedecinDirect back in March, all point to Teladoc continuing to lead the way in the Telehealth industry.
2. The Trade Desk
With The Trade Desk (NASDAQ: TTD) we have a not so simple solution to a not so simple problem. In a severely condensed version of its business plan, The programmatic advertising company operates a stock market-like platform for online advertisers to bid on advertising space. Through its large data sets and algorithms, advertisers can identify and target potential customers based on their online behavior across multiple channels and deliver to them targeted ads.
Is The Trade Desk a Buy?
The numbers from its Q3 earnings report are promising, significantly beating expectations from both analysts and the company’s previously stated guidance. In the call, The Trade Desk announced revenue of $164.2 million, up 38% from Q3 2018, EBITDA of $47.8 million and earnings per share of $0.75 per share, way up from predictions of $45 million and $0.67 respectively. With these results, the company has adjusted its guidance for the year 2019, bumping predicted revenue up to $658 million from $653 million and EBITDA to $209 million from $201 million previous.
We reported in August about the deal between Amazon and The Trade Desk which will allow The Trade Desk to sell advertising space on Amazon’s connected TV platform Amazon Fire TV. One of only two companies given such a privilege. This push for connected TV was one of the main talking points at the recent Q3 earnings call, with CEO Jeff Green identifying it as a big opportunity for the company to move into.
Programmatic advertising is taking over display advertising. With an expected spend of $81 billion dollars by the end of 2021, which will account for 88% of total digital display advertising spend, a company like The Trade Desk is in an enviable position with market-leading technology and strong relationships with the biggest players in the industry. Its push towards connected TV will be a big factor in its future growth and the outlook is very promising for the company.
Trade Desk is one of the darlings of MyWallSt’s portfolio and is currently our second-best performing stock since we picked it at the end of 2017. It has all the attributes of a stock to buy and hold for the long term: a market leader in a growing industry, a visionary CEO at the helm in Jeff Green, and a future relevant business model. We look forward to watching its continued rise.
MyWallSt operates a full disclosure policy. MyWallSt currently holds long positions in Teladoc and The Trading View. Read our full disclosure policy here.