2023-10-16 10:21:18 ET
Summary
- LifeMD, Inc.'s share price is soaring, once again.
- The company's focus on GLP-1 medications integration and primary care services exemplifies its commitment to comprehensive patient care.
- Its consistent increase in its share count could potentially dilute its progress.
Investment Thesis
LifeMD, Inc. (LFMD) is making a comeback. Previously, it was called Immudyne, Inc. (until 2018). After that, Conversion Labs, Inc. (approximately 2018 to September 2020), and now, LifeMD, Inc.
Its valuation has tripled within a few months. Also, its share count appears to be rapidly increasing with time. That's the bad news.
The good news is that LifeMD's prospects appear to be gaining substantial traction. This stock has a long history of being a battleground stock. And, I don't see this fact changing any time soon.
LifeMD's Near-Term Prospects
LFMD is a telehealth company that specializes in providing virtual healthcare services. With a focus on direct-to-consumer marketing and the health and wellness industry, the company offers a range of telemedicine and telehealth solutions.
Their services are designed to make healthcare more accessible and convenient for individuals, providing virtual consultations and treatments in various areas of healthcare, potentially including but not limited to primary care, mental health, and chronic condition management. Through their telehealth platform, LifeMD aims to bridge the gap between patients and healthcare providers, offering personalized and efficient healthcare services to improve overall wellness and quality of life.
LifeMD is strategically positioned to leverage the growing demand for comprehensive telehealth solutions and personalized healthcare services. The company's emphasis on integrating GLP-1 medications and primary care services, as seen through the successful rollout of the weight management program, underscores its commitment to delivering holistic, patient-centric care. By prioritizing the integration of various essential components, such as diagnostics, physician visits, lab work, lifestyle support, and access to specialized medications, LifeMD is on course to further expand its service offerings and strengthen patient acquisition.
Moreover, the recent development of partnerships within the health, wellness, and weight management sectors showcases the company's proactive approach to enhancing patient outcomes and fortifying its telehealth capabilities, signaling promising growth prospects in the near future.
On the other hand, LifeMD confronts a few notable challenges that could potentially impact its operational efficiency and market positioning. Case in point, the necessity for substantial marketing investments and the expansion of the clinical team to swiftly scale the weight management program stands as a prominent challenge.
While these investments are pivotal for bolstering patient acquisition and ensuring the delivery of superior healthcare services, they may temporarily strain the company's financial performance (more on this soon).
Additionally, the complex regulatory landscape and intricacies associated with insurance acceptance, particularly within the Medicare framework, present considerable obstacles in broadening the scope of the primary care platform.
Given this background, let's discuss its financials.
Revenue Growth Rates Set to Improve, But What's Next?
LifeMD's comparables are now improving. Not only will Q3 ( currently estimated for November 13th) be up against much easier comparable figures, but Q4 should see LifeMD's revenue growth rates sizzle.
Naturally, we must now question what sort of realistic growth rates should we expect for 2024.
I don't believe reasonable investors would expect to see LifeMD delivering around 40% or even 30% CAGR in 2024.
But if LifeMD ends up reporting around 25% CAGR in 2024, this is undoubtedly a very commendable growth rate. After all, LifeMD is now on a run rate of about $160 million in annual revenues. These are not small immaterial revenue figures. LifeMD is now big enough to be taken seriously.
LFMD Stock Valuation - Too Fuzzy
A few months ago, investors were paying less than 0.4x forward sales for LifeMD. And now this multiple has more than tripled and investors are quite content to pay more than 1.5x forward sales.
What sort of multiple makes sense for LifeMD? One part of me finds it difficult to recommend LifeMD, given its long history of being a highly pumped stock.
Additionally, when LifeMD's bigger competitor trades at a cheaper multiple than LifeMD, is it fair for LifeMD to trade at a premium multiple?
As you can see above, TDOC is priced at 1.2x forward sales, which is cheaper than LifeMD at 1.6x forward sales.
On the other hand, we must recognize the underlying fact that LifeMD's growth rates appear, at least for now, to be meaningfully stronger than Teledoc's.
What's more, LifeMD's balance sheet is finally on a strong footing, with an approximately net neutral position.
On the other hand, with the passage of time, LifeMD's share count is increasing at a rapid clip and unless its share count starts to stabilize, all the progress it is making will be too diluted over such a large share count.
The Bottom Line
LifeMD is undergoing a significant transition, with its recent valuation surge. That being said, this is together with a steady rise in its share count.
Overall, there's a positive trend as LifeMD focuses on integrating GLP-1 medications and primary care services. Its recent partnerships in the health and wellness sectors underline its commitment to holistic patient care.
However, challenges in scaling the weight management program and navigating complex regulatory frameworks, especially in Medicare, pose potential obstacles.
Despite its promising growth trajectory, the company's valuation appears somewhat stretched, raising questions about its comparative position against competitors like Teledoc.
Altogether, I'm neutral on LifeMD, Inc. stock.
For further details see:
LifeMD's Revival: The Phoenix Of The Health Industry