I think people need to scrutinize that $1.3b FY 2020 and then the $1.9b FY2021 number. $1.3b seems like the company is intentionally guiding low. The week before the merger, the TDOC announced their earnings, they guided to 980-995m for the year. LVGO had Q2 revenue of 92m and 1q reveue of 69m for 160m first half. Doing some basic math... 1.3B - 980m (TDOC low end guidance) means implied LVG revenue second half is 160m or no growth sequentially.
Meanwhile they are beginning to cross-sell this week, but even leading that out, LVGO has always grown squentially and they keep raising and beating. TDOC also has been beating and raising. To me, the most realistic situation is FY2020 revenue comes in closer to 1.4b, lets say 1.35B to 1.4B (do the math by looking at each company separately without cross-selling). That then means FY2021 is likely to also come in a bit higher since the base is higher, and that could be closer to $2.05B-$2.1B as opposed to 1.9B. It also means that the growth rates exiting those periods will be higher than expected.
If that turns out to be the case, these shares will be bid up to new highs IMO.
Thanks for the insightful article! Although I'm long on both LVGO and TDOC I have a couple of concerns, partially as an investor as the thesis around my investments has now radically changed and partially as my approach to apply the devil's advocate type thinking, especially when my own money is at play.
I was surprised to see the long list of acquisitions made by TDOC so far, I honestly was completely unaware and thought there had been only two (so mea culpa on background study). But the kneejerk question always is when seeing such a long list of acquisitions, how much they have been buying growth and revenue just to keep the numbers going, or have all of them really have been worth the cost in adding value to their solution? It could be either way, and it's relieving to a certain extent to know that TDOC has a strong experience with acquisitions needed in this merger, but it wouldn't be the first time a company is a bit too eager to but adjacent companies just for the numbers sake.
As a stock owner of LVGO/TDOC your optimism makes me feel good but, perhaps again playing the devil's advocate, I'm somewhat worried whether the new TDOC will become a healthcare titan that easily given the emerging and existing competition; while not all of these companies operate on the exactly same area it feels there's a bit of gold rush in this sector and any change in regulations or perhaps even macro economics could tilt the situation towards other players. Not in any particular order, but companies like Ontrak (OTRK), MTBC (MTBC), CVS Health (CVS), UnitedHealth Group (UNH) and more remote like Veeva Systems (VEEV), Guardant Health (GH).
Again, thanks for the excellent write up, I'll stick with both my positions at for the mid-term but I will definitely keep a close eye on developments in this sector.
You shouldn't be afraid of companies that do acquisitions, so long as they have a great track record of acquisitions. If they have a terrible reputation, then you should be very concerned.
You can unlock a lot of value doing the right, strategic acquisitions for the right price. I too was concerned with the competitive landscape,b ut when you look at lets say OTRK, I have read things recently about their CEO that leave me feeling good about TDOC and LVGO CEOs. The OTRK CEO has a history of self-enrichment and a checkered past...
TDOC and LVGO are conquering a new space, have all the momentum, and just did a tie up, and we know the CEOs both have very good reputations.
I thought it was interesting about people questioned LVGO as a "pay day" and "cashing out." But their "pay day" is going to be in TDOC stock just like the rest of us, and they're giving up control where they could control what they get paid salary wise at their own company. Have yet to see anyone talk about that, they are more invested in the outcome than any of us unless they all plan on dumping their shares immediately as possible, but I doubt that would happen.
great article but as I have come to realize that the doctor spends more time with patient and has to wait for them instead of what happens in a office visit. Unless there is an incentive for the doctor who hold the key relationship this may juts be a short term phenomena and post Covd growth could slow down . Please share your thoughts.
I notice a few comments on OTRK. OTRK does not compete with LVGO or TDOC, they are complementary. Neither LVGO nor TDOC proactively find new patients, they treat existing patients. OTRK identifies previously untreated chronic issues and delivers a treatment outcome to the insurer. Seems like OTRK multiple can expand in this environment where investors are coming to terms with this new industry and all the new players
What am confused about is going forward.When deal is final do I get the price of 158 a share.Or does it depend how Lvgo does in the future.I currently own 775 shares of Lvgo.And I own 500 shares of Tdoc.If shares of Tdoc go down will I get the lower price or the price of 250 when deal was announced.
Still confused about when deal happens what will shares of Lvgo worth.I read 158 a share.But now only 120 a share.Can it go down further or should it rise to the price of 158.Would you sell lvgo.I still own 750 shares.Thanks.
The formula does not work with current prices, there is a mismatch of $11 (even after including the cash consideration of $11.33). Somehow, it does not make sense
Yeah, there seems to be an arbitrage opportunity with LVGO shares. I believe we'll see the gap close as we move towards the deal close in December so I'll keep my LVGO shares.
I think people need to scrutinize that $1.3b FY 2020 and then the $1.9b FY2021 number. $1.3b seems like the company is intentionally guiding low. The week before the merger, the TDOC announced their earnings, they guided to 980-995m for the year. LVGO had Q2 revenue of 92m and 1q reveue of 69m for 160m first half. Doing some basic math... 1.3B - 980m (TDOC low end guidance) means implied LVG revenue second half is 160m or no growth sequentially.
Meanwhile they are beginning to cross-sell this week, but even leading that out, LVGO has always grown squentially and they keep raising and beating. TDOC also has been beating and raising. To me, the most realistic situation is FY2020 revenue comes in closer to 1.4b, lets say 1.35B to 1.4B (do the math by looking at each company separately without cross-selling). That then means FY2021 is likely to also come in a bit higher since the base is higher, and that could be closer to $2.05B-$2.1B as opposed to 1.9B. It also means that the growth rates exiting those periods will be higher than expected.
If that turns out to be the case, these shares will be bid up to new highs IMO.
Thanks for the insightful article! Although I'm long on both LVGO and TDOC I have a couple of concerns, partially as an investor as the thesis around my investments has now radically changed and partially as my approach to apply the devil's advocate type thinking, especially when my own money is at play.
I was surprised to see the long list of acquisitions made by TDOC so far, I honestly was completely unaware and thought there had been only two (so mea culpa on background study). But the kneejerk question always is when seeing such a long list of acquisitions, how much they have been buying growth and revenue just to keep the numbers going, or have all of them really have been worth the cost in adding value to their solution? It could be either way, and it's relieving to a certain extent to know that TDOC has a strong experience with acquisitions needed in this merger, but it wouldn't be the first time a company is a bit too eager to but adjacent companies just for the numbers sake.
As a stock owner of LVGO/TDOC your optimism makes me feel good but, perhaps again playing the devil's advocate, I'm somewhat worried whether the new TDOC will become a healthcare titan that easily given the emerging and existing competition; while not all of these companies operate on the exactly same area it feels there's a bit of gold rush in this sector and any change in regulations or perhaps even macro economics could tilt the situation towards other players. Not in any particular order, but companies like Ontrak (OTRK), MTBC (MTBC), CVS Health (CVS), UnitedHealth Group (UNH) and more remote like Veeva Systems (VEEV), Guardant Health (GH).
Again, thanks for the excellent write up, I'll stick with both my positions at for the mid-term but I will definitely keep a close eye on developments in this sector.
You shouldn't be afraid of companies that do acquisitions, so long as they have a great track record of acquisitions. If they have a terrible reputation, then you should be very concerned.
You can unlock a lot of value doing the right, strategic acquisitions for the right price. I too was concerned with the competitive landscape,b ut when you look at lets say OTRK, I have read things recently about their CEO that leave me feeling good about TDOC and LVGO CEOs. The OTRK CEO has a history of self-enrichment and a checkered past...
TDOC and LVGO are conquering a new space, have all the momentum, and just did a tie up, and we know the CEOs both have very good reputations.
I thought it was interesting about people questioned LVGO as a "pay day" and "cashing out." But their "pay day" is going to be in TDOC stock just like the rest of us, and they're giving up control where they could control what they get paid salary wise at their own company. Have yet to see anyone talk about that, they are more invested in the outcome than any of us unless they all plan on dumping their shares immediately as possible, but I doubt that would happen.
great article but as I have come to realize that the doctor spends more time with patient and has to wait for them instead of what happens in a office visit. Unless there is an incentive for the doctor who hold the key relationship this may juts be a short term phenomena and post Covd growth could slow down . Please share your thoughts.
Rajesh
Sequity advisors
I notice a few comments on OTRK. OTRK does not compete with LVGO or TDOC, they are complementary. Neither LVGO nor TDOC proactively find new patients, they treat existing patients. OTRK identifies previously untreated chronic issues and delivers a treatment outcome to the insurer. Seems like OTRK multiple can expand in this environment where investors are coming to terms with this new industry and all the new players
Should I keep Lvgo or do u think sell.
What am confused about is going forward.When deal is final do I get the price of 158 a share.Or does it depend how Lvgo does in the future.I currently own 775 shares of Lvgo.And I own 500 shares of Tdoc.If shares of Tdoc go down will I get the lower price or the price of 250 when deal was announced.
They move up and down together
Essentially locked (been so since the day of announcement)
Still confused about when deal happens what will shares of Lvgo worth.I read 158 a share.But now only 120 a share.Can it go down further or should it rise to the price of 158.Would you sell lvgo.I still own 750 shares.Thanks.
It's dynamic, each LVGO share will be worth 0.592 $TDOC shares + $11.33 going forward until the transaction closes in December.
The formula does not work with current prices, there is a mismatch of $11 (even after including the cash consideration of $11.33). Somehow, it does not make sense
Yeah, there seems to be an arbitrage opportunity with LVGO shares. I believe we'll see the gap close as we move towards the deal close in December so I'll keep my LVGO shares.