Talkspace (Nasdaq: TALK) completed its merger with Hudson Executive Group in a $1.4 billion deal to become a public company and trade on the Nasdaq. Since then, the stock is down by 35% as the market has exhibited some risk-off characteristics which have led to weakness in speculative parts of the market.
Talkspace is a platform where people can talk to therapists virtually. The company also offers more mental health services. It's increasingly becoming clear that mental health is going to be a major issue over the next decade given increasing rates of addiction, loneliness, anxiety, depression, etc., that are being exacerbated by modern technology and lifestyles. So, it's only natural that some businesses will emerge to try to provide solutions.
Inside the Numbers
Talkspace seems like it could play a valuable role by offering easier access to therapists. Unlike other types of medical visits, speaking to a therapist virtually is not too different than an in-person visit. For many people, there is a stigma to meeting with a therapist so Talkspace could make it accessible to more people. Additionally, it's likely to benefit from people being able to reach a therapist with a few taps on their phone.
The company is in the early stages of its growth curve as evidenced by its last earnings report. In Q1, Talkspace generated $27 million in revenue, a 144% increase from the previous quarter. The number of active members increased by 110%. For the full year, the company expects revenue of $125 million.
The company is growing its consumer brand but also partnering with employers to provide the service to employees for a discount. Like many platform-based businesses, Talkspace could be very profitable once it decides to focus on maximizing cash flow rather than growth. Currently, gross margins are 64%.
Stock Price Outlook
Talkspace has a nearly $1 billion valuation and only $125 million in revenue expected this year so all the usual caveats about high-multiple growth stocks apply. Further, there's likely to be competition in this space especially as established telehealth companies could offer similar services.
However, Talkspace should be on every investors' radar simply because the potential market opportunity is massive. Seeing a therapist is becoming normalized and increasingly seen as part of healthcare. If the company can become the dominant platform for therapists, then it could have significant upside.