The novel coronavirus puts telehealth stocks right up with e-commerce stocks as some of the market’s fastest movers. But like e-commerce companies, telehealth has been an emerging trend for quite some time. The pandemic has only accelerated the speed at which our nation was moving toward digital health.
But it’s taken some time to get there. History teaches that culture has some constants. One constant is the desire for a certain intimacy in the doctor-patient relationship. It goes back to the days when house calls were the norm.
The emergence of health maintenance organizations (HMOs) and preferred provider organizations (PPOs) made healthcare more efficient, but perhaps less intimate. Now with the onset of the Covid-19 pandemic, healthcare is going digital. But rather than technology creating distance, telehealth is actually bringing back a little intimacy to the doctor-patient relationship.
In an interview with CNBC, Brian Cuneo, global co-chair of the life sciences and healthcare group at the law firm Latham & Watkins made these remarks, “What we’ve seen with Covid is its been the catalyst in many ways for people to rethink lots of different areas of life, and access to and delivery of health care is one of the first and foremost.”
And how big is the market? According to Grand View Research, the global digital health market grew from $95.8 billion in 2018 to $114.5 billion in 2019. And this year that number is expected to reach $144.4 billion.
There are several privately held companies that are surging. But for the purposes of your portfolio, let’s focus on five of the biggest publicly traded companies. Shares of these companies have been climbing since the beginning of 2020.
- Teladoc Health (NYSE:TDOC)
- Livongo Health (NASDAQ:LVGO)
- One Medical (NASDAQ:ONEM)
- Humana (NYSE:HUM)
- CVS Health (NYSE:CVS)
Telehealth Stocks: Teladoc Health (TDOC)
Perhaps the most well-known of the telehealth stocks is Teladoc Health. Because of its size, Teladoc has resources in place to match patients with licensed physicians to help investigate symptoms, prescribe tests and medications if necessary. When necessary, the doctors can make referrals to specialists or emergency departments.
Despite its growth being interrupted by the March crash, shares of TDOC stock are up more than 170% in 2020. On its most recent earnings call, the company announced the following statistics. New users across the platform increased by 60%, and new registrations increased by 125% over the prior year. Teladoc believes that both numbers are the direct result of the Covid-19 pandemic bringing awareness and opportunity.
And based on the company’s internal satisfaction numbers, this will have a long-term effect on the company’s revenue. Plus, keep in mind that Teladoc estimates its potential patient base at perhaps more than 1.1 billion people. That means it is only covering 1% of its massive addressable market.
And, Laura Hoy wrote for InvestorPlace that Teladoc claims it can reduce healthcare costs by 28%, which means that patients will have a financial reason to continue using virtual healthcare.
Livongo Health (LVGO)
If you like the growth of Teladoc stock, you’ll love the growth of Livongo Health. Since the beginning of the year, LVGO stock is up over 340%.
Livongo comes at telehealth a bit differently from Teladoc. The company sells personalized coaching services to employers and health systems. At the end of March, the company had sold its services to 1,252 clients — that was a 44% sequential increase.
Those employers then offer the company’s benefits to its employees and members. It’s most popular product is founded in its expertise in diabetes management. InvestorPlace’s Will Ashworth wrote that the company’s No. 1 product named Livongo for Diabetes has more than 328,000 members. This is a growth of over 100% over the same period in the prior year.
Now Livongo is expanding into other areas such as hypertension/high blood pressure, weight management and behavioral health. The company had a record 380 client launches in the first quarter. The company defines a client as any business that has at least one active paid Livongo contract at the end of a quarter.
Telehealth Stocks: One Medical (ONEM)
One Medical is a new member of the telehealth stocks club. The company has only been publicly traded since January. However, ONEM stock is up nearly 75%. One Medical is more like Teladoc in the sense that it has a direct primary care model.
Patients pay the company a $199 annual fee. This gives them access to the company’s primary-care physicians and services. In some cases, the company gives patients the ability to text their doctors to schedule same-day appointments.
One Medical is using its capabilities to launch billable telemedicine visits while helping facilitate testing, collecting patient specimens at outdoor testing sites and designated respiratory care clinics.
But what may be more intriguing is that the company is seeking to educate patients with features like behavioral health consultations and a worksite reentry program. This allows employers the tools to safely bring workers back into the workplace.
One of the catalysts opening up the addressable market for telehealth is that insurance companies are now agreeing to cover these visits. But lest you think that telehealth was going to completely replace traditional insurers, Humana has made a significant investment in telehealth services.
There is obviously a financial component to this. As patients and employers continue to find ways to lower costs, telehealth is being seen as an opportunity to bring down the cost of doctor visits. Is it helping Humana? It appears to be. Despite the market selloff, Humana’s revenue increased by 18% year over year. During the same period, the company’s net income dropped 16.4%.
Humana is not quite as hot as pure-play telehealth stocks. Still, HUM stock is up nearly 10% for the year despite dropping over 42% in March. But one of the advantages you get with a mature stock like Humana is its dividend. And that’s a dividend Humana has increased for the last nine consecutive years.
Telehealth Stocks: CVS Health (CVS)
The last of the telehealth stocks we’re looking at is CVS Health which has been a fixture in the telehealth sector for two years. The company uses Teladoc Health’s platform to deliver its direct-to-consumer platform.
CVS posted $66.8 billion in revenue in the last quarter. However, as of yet, telehealth provides only a small amount of the company’s revenue. But that could be changing.
In a press release issued after the outbreak of the Covid-19 pandemic, president and CEO Larry J. Merlo said, “When facing any health crisis, including this pandemic, we’re uniquely positioned to understand consumer and patient needs and how to address them. This includes increasing access to medicine and virtual care.”
And remember, like Humana, CVS has the opportunity to pour actual earnings into its telehealth initiatives. And with $2.1 billion in net income last quarter, the company should be big enough to keep growing its own telehealth services while keeping Teladoc at arm’s length.
In 2020, CVS stock is down by almost 14% but is still up almost 20% since March. And the company posts a dividend of $2 per share annually.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.