Stocks’ Details

Livongo Health, Inc. 

A Look at 2QFY20 Key Highlights: Livongo Health, Inc. (NASDAQ: LVGO) is a consumer digital health company, which is engaged in offering Enter Livongo platform, in order to leverage data science and technology, for people with chronic conditions. During the June quarter, the company reported, total revenue of $91.9 million, which skyrocketed 125% year-over-year, mainly due to continued adoption of the company’s Applied Health Signals platform. In 2QFY20, the company accomplished several performance milestones that resulted in ~$2.5 million of revenue. The company witnessed an increase of 119% in revenues, which excluded non-recurring items. The company reported a non-GAAP gross margin of 77.3% during the quarter, up from 71.6% reported in 2QFY19. Non-GAAP net income for the quarter stood at $12.5 million, with adjusted EBITDA amounting to $13.3 million. The company recorded more than 410,000 Diabetes Members as of June 30, 2020, up 113% on pcp. The company exited the quarter with a cash balance of $685.9 million.

Key Highlights (Source: Company Reports)

Growth Momentum: The company is likely to benefit from its Diabetes solution. Significant contributions from hypertension, weight controlling, and behavorial health contributions could be key catalysts. Additionally, robust demand in LVGO’s pipeline, increase in member enrollment and new client signings add to the positives.

Key Risks: The company has experienced a rise in operating expenses, which in turn can weigh on its performance, going forward. Further, stiff competition from peers adds to the woes.

Stock Recommendation: The company retains a decent liquidity position with flexibility to react to the current environment. The company’s cash balance permits to make significant investments in its platform. The stock gave a return of 191.64% in the past three months and a return of 75.88% in the last one month. The stock is inclined towards its 52-week high of $149.84 and retains a limited potential for further growth. On a TTM basis, the stock of LVGO is trading at an EV/Sales multiple of 51.1x, higher than the industry median (Healthcare) of 7.9x and thus seems overvalued. Considering the current trading levels, sharp movement in the share price in the last three months, and risks regarding increasing expenditure, we suggest investors to wait for better entry levels and give an “Expensive” rating on the stock at the closing price of $128.06, down by 11.4% on 5 August 2020.

Teladoc Health, Inc. 

TDOC Inks a Deal With LVOC: Teladoc Health, Inc. (NYSE: TDOC) is engaged in offering virtual access to high-quality care and know-how with a portfolio of services and solutions, to treat diseases like flu and upper respiratory infections, complicated medical conditions like cancer and congestive heart seizure. On August 5, 2020, TDOC inked a merger agreement with Livongo (LVGO) to improve the delivery, access, and experience of healthcare for consumers around the globe. 

2QFY20 Key Financial Highlights: During the quarter, the company reported a loss of 34 cents per share, as compared to the year-ago loss of 41 cents per share. This was primarily due to strong revenue growth, owing to robust demand for its telehealth services amid the COVID-19-led crisis. The company reported operating revenues of $241 million, up 85% year over year, owing to higher subscription access fees and visit fee. Notably, revenues from subscription access fees increased 64% year over year. During the quarter, the company reported a total expenditure of $248.2 million, which rose 63% year over year, owing to higher advertising and marketing expenditure. Further, costs related towards technology and development enhancement, legal and regulatory, acquisition and integration also rose the total expenses during the quarter. The company exited the quarter with a cash balance of $1.3 billion, and total debt amounted to $948.2 million.

Key Highlights (Source: Company Reports)

Outlook: For the coming quarter, TDOC expects total revenues to be in the range of $275-$285 million and total adjusted EBITDA to be in the ambit of $27-$31 million. The company expects total visits to be in the range of 2.5 million and 2.7 million. For 3QFY20, the company expects a net loss per share to be 30-35 cents per share. Coming to FY20 outlook, the company expects revenues to be in the vicinity of $980 million and $995 million, and adjusted EBITDA in the band of $85-$92 million. The company expects total visits to be in the range of 9.8-10.3 million. For FY20, the company expects a net loss per share to be $1.36 and $1.45. For 2021, TDOC projects revenue growth to be in the range of 30-40%. 

Key Risks: The company is exposed to a number of risks which includes regulatory approvals (including anticipated tax treatment), increasing operating expenditure, coronavirus induced lockdown, stiff competition in the market and failure to retain clients in the uncertain economic condition.

Stock Recommendation: The stock of TDOC closed at $202.01 with a market capitalization of ~$16.4 billion. The stock made a 52-week low and high of $54.58 and $253, respectively, and is currently trading above the average of its 52-week trading range. The stock gave a negative return of ~3.29% in the past one month but has increased by ~19.12% in the last three months. Considering the trading levels, price movement in the last one year and merger related developments, we have a watch view on the stock at the closing price of $202.01, down 19.01% on 5 August 2020.

Lexagene Holdings 

LXXGF Boosts its Flagship Product, MiQLab™: Lexagene Holdings (OTC: LXXGF) is a molecular diagnostics company, which is engaged in developing a fully programmed rapid pathogen detection platform for use at the point-of-need where samples are collected. On July 14, 2020, the company stated that it has hired the first series of salespeople to boost the commercial release of MiQLab™ before the end of September this year. On July 13, 2020, the company revealed the name and first look of its leading product, called MiQLab™.

Key Financial Highlight for the period ended 29 February 2020: During the period, the company reported a net loss of $7.5 million, as compared to the net loss of $8.3 million in the year-ago period. Diluted net loss per share for the period stood at $0.10 per share. Net loss for the quarter included $0.15 million in foreign currency losses. Research and development expenses stood at $4.46 million, down from $5.38 million in the previous corresponding quarter. General and administrative expenses stood at $2.14 million as compared to $1.68 million reported in the previous year.  The company reported $3.19 million in cash and cash equivalents as on 29 February 2020. Notably, the company does not generate any revenue and has an accumulated deficit of $24.4 million, since inception. Cash used in operating activities for the period stood at $5.4 million.

Income Statement Highlights (Source: Company Reports)

Key Risks: On the flip side, the company has been carrying the burden of operational inefficiency for the past numerous quarters. Increasing general and administrative expenses is likely to reduce operating margins. Also, the company is exposed to risks relating to foreign operations that are required to be addressed from time to time. Further, coronavirus led uncertainty and stiff competition from peers adds to the woes.

What to Expect:  The company took necessary steps to ensure the safety and well-being of patients and caregivers, curtail risk of supply disruption, and achieve its growth strategies. The company remains on track to achieve its vision to create a technology, particularly during these difficult times. Notably, the company has completed integrating the feedback from beta testing and have commenced production of commercial instrument, the MiQLab genetic analyzer. The move will give the company a competitive advantage over its peers, going forward.

Stock Recommendation: The stock of LXXGF closed at $0.76 with a market capitalization of ~$74.5 million. The stock is trading at the upper band of its 52-week trading range of $0.3038 to $0.9282. The stock of the company went up 19.53% and 38.18% in the last one month and three months, respectively. As per the Management, the current cash and cash equivalents are enough to fund operations and capital obligations in the coming days.  The company has a debt to equity ratio of 0.50x in FY20, higher than the industry median of 0.30x. The current ratio of the company stands at 6.57x in FY20, higher than the industry median of 3.55x. Considering the above-mentioned facts, and current trading levels, we suggest investors to wait for better entry levels and give a watch stance on the stock at the current market price of 0.76, down by 1.3% on 5 August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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