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TICKERS: DOC; DOCRF; 6PH, DRIO, LVGO, STRM, TDOC, MEDS, VHI

$18.5 Billion Merger Could Mean Big Gains for These Five Tiny Telemedicine Stocks
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Matt Badiali Independent financial analyst Matt Badiali examines five small companies poised to profit as digital health becomes mainstream during the coronavirus pandemic.

A bombshell deal just hit the digital healthcare space. Giant ($17.2 billion) telemedicine company Teladoc Health Inc. (TDOC:NYSE) announced its merger with digital chronic care provider Livongo Health Inc. (LVGO:NASDAQ) for $18.5 billion.

This is a huge deal that will generate a lot of interest in the telemedicine space.

The merger creates a robust virtual doctor's office in Teladoc. The new company now offers both routine care and chronic care services. Livongo specializes in digital diabetes care. It has 410,000 members on its digital platform. And that is a tiny (1.3%) fraction of the potential market.

The deal looks expensive. Teladoc paid $18.5 billion for Livongo. Here's how that breaks down:

livongo1

Teladoc paid 55x Livongo's 2020 estimated revenue, or 36x 2021 estimated revenue. That's a huge gamble on the future of telemedicine.

But it was also a huge win for Livongo investors. The price locked in a triple for investors in Livongo's initial public offering (IPO) in July 2019.

That begs the question, "Who is next?"

There aren't many junior telemedicine companies out there. Here's a quick summary of five candidates listed in both Canada and the U.S.

fivecos

CloudMD Software & Services Inc. (DOC:TSX.V; DOCRF:OTCQB; 6PH:FSE): Cloud MD is a digital medical service that offers routine care. Similar to Teledoc, it services customers across Canada. It recently bought a U.S.-based mental health and complex care clinic.

The company's growth looks great. Bloomberg estimates that Cloud MD will grow revenue by 111% from 2020 to 2021.

DarioHealth Corp. (DRIO:NASDAQ): DarioHealth is a global digital therapeutics company that specializes in diabetes and hypertension management. It's the closest peer to Livongo in this group of companies. It recently raised $28.6 million to expand its business from individuals to companies.

Bloomberg estimates a 62% growth in revenue from 2020 to 2021.

Trxade Group Inc. (TRXD:OTC.MKTS): Trxade is an e-commerce site for prescription drugs. It allows customers to price shop for prescription drugs. It runs "the largest technology platform serving the pharmaceutical supply chain." It is the eBay of prescription drugs.

Bloomberg estimates 10% growth in revenue from 2020 to 2021.

VitalHub Corp. (VHI:TSX.V): Vitalhub is a digital data provider that serves the mental health, addictions and long-term care community. It supplies a suite of services to reduce gaps and streamline record-keeping.

Bloomberg estimates 28% growth in revenue from 2020 to 2021.

Streamline Health Solutions Inc. (SRTM:NASDAQ): Streamline Health optimizes billing, coding and documentation for medical service providers. Its digital accounting services improve financial performance for healthcare providers.

Bloomberg estimates a 42% decline in revenue from 2020 to 2021.

It's clear that digital healthcare is exploding during the current pandemic. These companies should grow along with it. According to Polaris Market Research, the U.S. telemedicine market will reach $17.1 billion by 2026. That's up from $6.6 billion in 2019.

And while these companies are small, their price to revenue is a fraction of what Teladoc paid for Livongo. If you are looking for speculations in digital health, these five are worth digging into.

Reach Matt Badiali at www.mattbadiali.net.

Matt Badiali is a geologist and independent financial analyst. He spent fifteen years researching and writing about great investments inside the natural resources sectors. He can be reached at www.mattbadiali.net.

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Streetwise Reports Disclosure:
1) Matt Badiali: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with CloudMD. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of CloudMD, a company mentioned in this article.




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