Teladoc Shares Sell Off Despite Positive Initial Analyst Coverage

Now the quiet period has ended and the underwriters have been able to issue their official coverage. Teladoc’s underwriters included J.P. Morgan and Deutsche Bank as the joint book-running managers; and William Blair, Wells Fargo, and SunTrust Robinson Humphrey were the firm’s co-managers in the syndicate.

Teladoc closed at $28.50 on its first day of trading (July 1), and had a low closing price of $26.25 (July 8) versus its highest closing price being $32.15 just last Friday.

Investors buying into Teladoc know that it is among the oldest and strongest of all tele-health outfits. The company provides telehealth services via mobile devices, the Internet, video, and phone to its clients and their customers in the United States. Its solution connects consumers with its physicians and behavioral health professionals

Wells Fargo initiated coverage of Teladoc with an Outperform rating and a 12-month valuation range of $33 to $37 based on 7 times to 8 times their 2017 revenue estimate of $174 million. Be advised that the firm is looking for Teladoc to post losses in earnings per share in 2015 and 2016. The team said:

Healthcare is starting to see the collision of technology and consumerism. This is creating disruptive business opportunities, which includes telehealth. We believe the convenience presented by having a physician encounter whenever/wherever and the dramatic cost advantage versus traditional settings is likely to drive significant growth for telehealth in the coming years. Teladoc has positioned itself as the leader in this market. Its size and reputation have allowed the company to pursue a somewhat unique fee model that drives significantly higher utilization of telehealth among its members, and thus higher savings. While there may already be somewhat of a scarcity premium in the stock, we believe the growth still makes it worth owning.

Other analyst calls were seen as follows:

• Deutsche Bank started it as Buy with a $38 price target.
• J.P. Morgan started coverage as Overweight with a $38 price target.
• SunTrust Robinson Humphrey started it as Buy with a $37 price target.
• William Blair initiated coverage as Outperform.

Prior to the quiet period expiring, due to the firm not being in the underwriting syndicate, Cowen & Co. started coverage of Teladoc with an Outperform rating and a $39 price target. Also prior to the quiet period expiration and with the firm not being an underwriter for this IPO, RBC Capital Markets started Teladoc with a Outperform rating and $35 price target.

Teladoc shares were lower as the quiet period came to an end, but that is often the case. Teladoc shares were down 3.6% at $31.00 on Monday in late-morning trading.

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