Analyst: When Americans Sneeze, Teladoc And Athenahealth Profit

After the CDC released its flu report for the week ending Dec. 30, Canaccord Genuity looked at which companies could benefit from the strong start to the flu season.

The report showed that 5.75 percent of U.S. outpatient visits during the week were due to influenza-like illnesses. While not a positive for the patients, it's a plus for Teladoc Inc TDOC and athenahealth, Inc ATHN, according to Canaccord.

The Analyst

Canaccord Genuity analyst Richard Close has a Buy rating and $42 price target for Teladoc; and a Hold rating and $123 price target for athenahealth.

The Thesis

Nearly all of Teladoc's telemedicine visits outside of Best Doctors are for low-acuity conditions, including Influenza-like illness, or ILI, Close said. (See the analyst's track record here.) 

About 1-8 percent of Teladoc's visits in an average month come from patients experiencing ILI, with the winter months hitting the higher end of the range, according to Canaccord. 

"As such, during this year's so-far-strong flu season, we are expecting TDOC to benefit from higher volumes of telemedicine visits related to ILI." 

Canaccord's current estimates appear conservative, given the strong flu season, Close said. 

"In particular, our PEPM and visit growth estimates appear conservative." 

Canaccord forecasts fourth-quarter revenues of $75 million for Teladoc against a consensus estimate of $76 million and guidance of $75 to $77 million.

On Monday, Teladoc announced preliminary 2017 revenues of $232 million, membership of 23 million and visits of 1,460,000. For the fourth quarter, the company expects revenues of $76 million, adjusted EBITDA of $2.5 million and a 48-percent increase in total visits to 460,000.

Analysts, on average, expect Teladoc to notch full-year revenues of $232.31 million and fourth-quarter revenues of $76.09 million.

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With all of athenahealth's customers based in physician offices, Canaccord projects that a strong flu season will result in higher outpatient visits, a positive for the company. Given that athena's revenue model is based on a percentage of collections at the customer point, Close said higher volumes will directly benefit revenues.

Since there's a lag between visits and collections, the firm expects the strong 2017 fourth-quarter flu season to contribute more to athenahealth's results in the first quarter of 2018. 

For the fourth quarter of 2017, Canaccord estimates revenues of $325 million, representing year-over-year growth of 12.7 percent. This compares to the consensus of $320 million and the implied guidance of $309 million to $329 million.

Canaccored estimates revenues of $312 million for the first quarter of 2018, up 9.5 percent, but below the consensus estimate of $316 million.

The Price Action

Over the last year, Teledoc shares have jumped about 118 percent, while athenahealth shares have added a more modest 16 percent.

Teledoc shares were sliding 4.80 percent to $35.70 before the close Monday, while athenahealth was up 1.27 percent at $135.75. 

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