The novel coronavirus appears to have reached its peak, at least for the time being. New case counts are slowing in many regions of the country, and the nation’s focus has started to turn toward other subjects. However, the virus will leave a lasting impact on many industries, even once the acute phase of the crisis has passed. And telehealth stocks are right there among the winners.
The virus exposed many gaps in the current healthcare system. And while there’s no magic bullet to fix them, doctors, regulators and insurance companies will be looking to make significant changes to their practices. One area of low-hanging fruit is in telemedicine. By offering many healthcare services digitally, we can reduce strain on the system, lower costs and increase access for patients with mobility issues. The lockdowns in particular highlighted how valuable remote health care will be.
That said, if you’re looking for pureplay telehealth stocks, there are only a few names available right now. This is an emerging industry, and new companies are just now entering the arena. But don’t fear, there are a bunch of quality healthcare and technology stocks that will also benefit as telehealth continues to flourish in coming years. Here are seven telehealth stocks that could have plenty of growth to come over the next decade:
- Teladoc Health (NYSE:TDOC)
- Zoom Video (NASDAQ:ZM)
- Humana (NYSE:HUM)
- Anthem (NYSE:ANTM)
- CVS (NYSE:CVS)
- iRobot (NASDAQ:IRBT)
- Castlight Health (NYSE:CSLT)
Let’s take a look at what makes each of these companies standout in a post-coronavirus world.
Telehealth Stocks to Buy: Teladoc Health (TDOC)
Teladoc is the main star in the telehealth stock space right now. And with good reason. The company has combined a good product, great marketing and first-mover advantage to leap ahead of other potential rivals.
Our Matt McCall has the scoop on why Teladoc is such a fantastic growth opportunity. It has grown its platform capacity by 5x over the past year and can now handle up to 100 million members, to highlight just two of the company’s astounding figures. And the coronavirus has made the company a star; virtual visits are up exponentially thanks to the virus.
Unfortunately, for current buyers, the share price has also rocketed up. The company’s valuation has nearly tripled since last summer. This has led to a $12 billion market capitalization and a 20x price-to-sales ratio, both of which are rich for an early-stage growth company that still hasn’t reached profitability. Teladoc has a world of potential, but you might be able to get it for a cheaper price during the next correction.
Zoom Video (ZM)
Thanks to the coronavirus, almost everyone knows about Zoom Video nowadays. It’s one of the hottest stocks out there for playing the work-from-home trade. But did you know it’s also one of the original players in the telehealth space?
Back in 2017, Zoom launched what it billed as the “first scalable cloud-based video telehealth solution.” It didn’t immediately take off in the same way as, say, Teladoc has done for mobile medicine.
However, with Zoom in the spotlight thanks to the video-conferencing boom, healthcare professionals are discovering that the company has a strong offering in the space as well. Zoom’s video healthcare solution comes with key features, such as built-in patient privacy protections, remote waiting rooms, remote camera control and support for cameras, digital stethoscopes and more. The company has signed up important clients, such as the Moffitt Cancer Center to use its video offering. Look for significant growth for Zoom Video in telehealth over the next few quarters.
I’d personally placed the health insurance companies in the penalty box last year, and I sold my stake in Humana. With the rise of populist politicians like Bernie Sanders and Elizabeth Warren, there was significant political risk to holding positions in the private health insurance industry. Now, with Joe Biden as the apparent nominee for the Democrats, however, it appears plans to phase out private insurance are off the menu for at least the next four years.
That puts Humana and other insurers back in the mix. While their stocks have moved up significantly, they could have more upside in coming months. Humana, in particular, has been a first adopter in the telehealth space. It was already implementing virtual doctor visits to lower costs and improve patient outcomes prior to Covid-19. And during the crisis, it has offered more than 150 different health services virtually.
Humana’s CEO Bruce Broussard went on CNBC to explain how telehealth will change the medical landscape. Broussard said that: “You’re going to see a different health care system as a result of the virus that is going to be much more distributed in the ability to deliver care.” By waiving co-pays for many virtual services during the crisis, Humana is already preparing its patients for a post-Covid world that will use far more remote visits.
Like Humana, Anthem has been quick to implement virtual healthcare. Anthem has offered telehealth services dating back to at least 2016. And the coronavirus has given them an opportunity to expand on that. In California, for example, Anthem has rolled out more than 200 digital kiosks that allow patients access to community resources, telehealth services, video conferences and insurance benefits information. Crucially, these kiosks offer live interpretations in dozens of languages so that all patients, regardless of their ethnicity, can get real-time help.
As with Humana, this sort of leadership in adopting virtual medicine should improve patient outcomes and help reduce costs. There’s a ton of inefficiency in the healthcare system, and the insurance providers can potentially score significant profits by eliminating red tape. The widespread use of kiosks, for example, could significantly lower costs even after the coronavirus is long gone.
In the drugstore space, CVS has taken a sharply different course from key rival Walgreens (NASDAQ:WBA). Walgreens has focused primarily on running its namesake pharmacies. Meanwhile, CVS has taken an all-in-one approach. It wants to offer not just the pharmacy but also the insurance plans and the pharmacy benefit manager that ties it all together.
While it’s unclear which approach will prove more profitable, CVS is clearly in the pole position if you’re bullish on telehealth stocks. With CVS’ dominant position across the healthcare industry, it collects a wealth of information. It should be able to use big data to arrive at all sorts of solutions that lower costs and improve patient outcomes.
We don’t know how well CVS’ mergers and acquisitions will play out just yet, as some of them are still fairly recent. The Aetna deal in particular was a massive move that will take time to fully integrate. However, when the firm reaches its full potential, it could become a massive player in the telehealth space, ultimately become one of the hottest telehealth stocks to buy.
You probably know iRobot as the company that makes those home-cleaning robots. But that’s not the only product they’ve commercialized; iRobot also helped create the first telemedicine robot.
IRBT, along with parter InTouch, received Food and Drug Administration approval in 2013 for a robot that could facilitate virtual meetings between doctors and patients. Their RP-Vita robot was useful for allowing doctors to collect information, via iPad, when they couldn’t meet with a patient in person.
As it turns out, iRobot remained invested in InTouch. And then InTouch subsequently sold itself to none other than Teladoc recently. In the company’s most recent annual report, iRobot states that it will earn a profit on its investment in InTouch when Teladoc finishes acquiring it later this year. That profit is nice, and may be something that investors haven’t factored into their outlook for iRobot. Beyond that, consider that iRobot has already gotten FDA approval for a telemedicine robot years ago. As the space heats up post-Covid-19, it could be a fruitful area for more research and development funds.
Castlight Health (CSLT)
Castlight is a software company focused on the healthcare. It serves as an information portal connecting various players in the healthcare space, including doctors, insurance firms and others. As telehealth takes hold, the value of this sort of network should grow. That said, the company stumbled under its prior CEO, leading to the loss of major customers, and a stock price that plummeted into penny stock territory.
However, the company has new management and has posted strongly improved operating results recently. It’s too early to know if the new direction will continue, but the company appears to be back on track. On top of that, Castlight quickly made a move to offer its services to help with the coronavirus. It launched a test site finder to help patients identify test locations safely.
CEO Maeve O’Meara described the company’s role: “As we continue to respond to the COVID-19 pandemic on a national scale, our team has been tapping into our wealth of healthcare data to build resources that can help everyday Americans protect themselves from the virus. Access to this testing site finder will help New Yorkers self-assess without leaving their homes and find the nearest testing site if their symptoms become severe.”
While Castlight is unlikely to generate large revenues from this sort of project, it highlights the value that a health information network can provide as the medical system becomes more digitized. Covid-19 could end up as an accelerator that drives far more traffic to Castlight’s information portal.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he owned WBA stock.