TDOC - Forget Livongo: This Might Be a Stronger Telehealth Stock
A couple of weeks ago, Teladoc Health (NYSE: TDOC) announced a surprise merger with Livongo Health (NASDAQ: LVGO). I'm a big fan of both companies, and I've been kicking myself all year for not having invested in either virtual healthcare player. Teladoc's chief service allows sick people to consult with doctors over the internet, while Livongo provides virtual assistants and health coaching for people with chronic illnesses.
Both stocks have killed it so far in 2020. And yet, when Teladoc revealed it was buying Livongo, the stock market hated the news: Shares of both companies took a big hit. You might expect the buyer's share price to sink if the market felt it was overpaying for the acquisition, but in that case, why would the target's shares drop so much?
It might be that the acquisition of Livongo will create opportunities for rivals to step up and take market share in the digital-assistant healthcare niche. Certainly, the stock of Ontrak (NASDAQ: OTRK), which provides similar digital health management services, has been skyrocketing recently. It ran up 55% in July. And when the merger was announced, Ontrak's stock shot up almost 50% the next day.