RBC Says Teladoc Could Revolutionize Virtual Medicine; Sees $35/Share

In a report published Wednesday, RBC Capital analyst David Francis initiated coverage of

with an Outperform rating and $35 price target. The analyst believes that the company has the potential to revolutionize health care delivery with virtual medicine. "Early leadership in revolutionary, hyper-growth VirtMed market positions TDOC for revenue growth in excess of 50 percent for several years. At scale, we believe the business model is capable of generating significant margin while creating a platform for additional revenue opportunities in the emerging CHIT market," Francis explained. The analyst believes that the $250 million VirtMed market would grow to over $20 billion over the coming decade. With the elimination of unnecessary visits to the ER or to physicians with low acuity, more than $60 billion can be potentially saved annually. "With cost pressures escalating, the economics of VirtMed alone create a significant new revenue opportunity in our view. Adding PopHealth and secondary market opportunities, we believe the VirtMed market could ultimately exceed $50 billion," according to the RBC Capital report. The analyst believes that Teladoc has already established a leadership position in the VirtMed market, from a revenue growth and membership perspective. Not only does the company has first mover advantages, it also is well positioned in a market that appears to be at the tipping point of mass acceptance to deliver organic revenue growth of more than 50 percent over the coming several years. "In a market that has struggled to solve the chicken/egg riddle of engagement and reimbursement, we think Teladoc has been the most successful VirtMed provider to target self-insured employers, driving subscription and utilization growth. That leadership position placed Teladoc out front of an engagement wave that we believe is at a very early, high-growth stage," Francis added. With Teladoc's VirtMed solution received over 95 percent user satisfaction ratings, and RBC Capital's CHIT survey data demonstrating increasing acceptance of such solutions, the analyst believes that there would be rapid uptake of VirtMed solutions when they are made available by insurers and employers.