Virtual healthcare provider Teladoc to acquire competitor; shares jump 6%
Quotes on the small-cap telemedicine platform Teladoc Health surged almost 6% yesterday, Wednesday, February 5, before extending the gains in premarket trading today. The trigger was an announcement that the company had signed an agreement to acquire Catapult Health, which provides at-home diagnostic kits. The deal follows a challenging period that saw the market valuation of Teladoc shrink more than 18-fold from its pandemic peak.
Details
Yesterday, Teladoc jumped almost 6% on the New York Stock Exchange to close at $11.00 per share, the highest level in nearly two months. The rally extended into premarket trading today, with shares up another 1.5%. However, the stock is still off 46% over the last 12 months.
Earlier in the day yesterday, Teladoc announced it had signed an agreement to acquire Catapult Health, which it described as a «leading provider of virtual preventive care services.» The company expects the acquisition to enhance its preventive care and chronic care management capabilities.
The all-cash deal, expected to close in the first quarter of 2025, is valued at $65 million, with potential additional payments of up to $5 million.
Why the deal matters
Catapult, which generates about $30 million in annual revenue, specializes in preventive care, offering services such as its VirtualCheckup program. Patients receive a kit from Catapult to collect a blood sample and measure their blood pressure. They can then discuss the results with a doctor via a video call. Those diagnosed with health conditions or risk factors are referred to Teladoc Health specialists, who offer programs for diabetes, hypertension, prediabetes, weight management, mental health, and primary care.
In its most recent earnings report, released in October, for the third quarter of 2024, Teladoc posted a 3% year-over-year decline in revenue to $640.5 million and a 42% reduction in its third-quarter-2023 net loss to $33.3 million.
Analyst insights
The acquisition comes as Teladoc seeks to bounce back after its 2020 Livongo acquisition, notes Noble Capital Markets. At the time, investors — in view of the pandemic-driven rise in demand for telehealth — valued the combined company at $37 billion. However, Teladoc stock has since plummeted more than 18-fold, which has brought down its market capitalization to around $1.9 billion.
«The acquisition of Catapult Health represents a strategic effort to regain momentum and strengthen its position in the evolving telehealth market,» Noble pointed out.
Earlier, Bloomberg Intelligence included Teladoc in its 2025 watchlist. In June, the company appointed Charles Divita III as CEO. Under him, Teladoc is pursuing international expansion and deeper integration into insurance plans. However, Bloomberg Intelligence noted that progress has been slow.
According to MarketWatch, out of the 28 analysts covering Teladoc, six have «buy» recommendations, while 22 rate it a «hold.» Their average target price of $10.86 per share is below the current market price.
