Has the Pandemic Created A Telemedicine Bubble?

1 week ago 5

Are telemedicine stocks here to stay, or going away?

Telemedicine experienced strong growth leading up to 2020, but covid-19 gave the sector afterburners with telemedicine companies seeing their stock price multiply many times over from the start of the pandemic.

Now that vaccines are rolling out and restrictions being lifted, it’s worth questioning if telemedicine companies will continue growing at the same pace or if it’s a bubble about to pop.

I think it’s a mix of both, let me explain why.

First off, it’s important to note that the global telehealth market already was growing 19% on a year-on-year basis leading up to the pandemic, with forecasts expecting grow to be even faster in the years to come. The estimated virtual care market in the US alone is $250 billion.

Other technologically advanced countries such as Finland and Sweden have also been using telemedicine apps and services for many years, so it’s not something that is limited to the US, but rather a disruptive service and technology that is being rolled out globally.

(source: statista.com)

Primarily, telemedicine is often being used for simpler medicinal tasks such as asking a medical professional for advice or to get a new drug prescription.

To put this into perspective, if all you needed was a new prescription, for which you often need to visit the doctor’s office, would you prefer to travel to/from the doctor’s office for 30-60 minutes + spend an additional 30 minutes in the waiting room? Or would you prefer just picking up your phone from the comfort of your own home, have a 5-minute video-call with your doctor and get the prescription?

I think we all would prefer the latter which goes to show why the growth forecast shared above isn’t unrealistic in my opinion.

Teladoc (NYSE: TDOC) is pushing to become a ‘whole person care’ service, primarily focusing on providing virtual primary care, something they want to achieve via their soon-to-be-launched program called “Primary 360”.

One example of a service included in this program is the growing ‘hospital at home’ space by extending patient monitoring beyond discharge from the hospital by hooking up monitoring devices to their application/platform which then continuously can monitor patients’ vitals and send them directly to the hospital/doctors.

Most companies only focus on the product/service right in front of them, whilst Teladoc looks way beyond this. 

Based on this, we think Teladoc is headed towards a bright future, making it an ideal candidate for investors looking to add telehealth to their portfolio.

Technical Analysis

TDOC technical analysis 2ndskies

Since the all-time-high of $308 in mid-February this year, Teledoc (NYSE: TDOC), at the time of this writing, has declined 50% and looking at the price action, there is likely more downside to come.

As you can see in the chart above, the periods of selling are strong whilst the consolidations/pullbacks are very weak, something that from a price action perspective is highly indicative of the order flow in this stock still being heavily skewed towards the sell-side.

We therefore do not think that Teledoc is a good buy at the current price, unless we see a strong short-term reversal in the price action from bearish to bullish, which for now, clearly isn’t the case.

If the stock continuous to slide, there is a strong area of support waiting between $86 and $107 which we think makes for a potential area to look for long-term investors.

Option Positioning

Currently the market is put heavy with 200K puts out there vs 150K calls. ST we think resistance comes in around $155 with support levels coming in between $86-$107.

FULL DISCLOSURE: Chris Capre currently has no stock or option position in TDOC, but he does have pending limit orders on TDOC. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.

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