Healthcare organizations utilize more data than ever. Important functions include Medicare’s reimbursement of insurers, use of AI by healthcare providers and patient access to medical data. As a result, investors should consider buying “big data” stocks with a high degree of exposure to the healthcare sector.
The novel coronavirus pandemic also boosted the need for data. According to mobihealthnews, “COVID-19 has prompted more healthcare organizations to embrace the idea of intelligent data as a tool for migration to digital health.”
The website noted, for example, that clinicians use data from biometric devices to treat patients remotely. That technique enables healthcare providers to save time and money.
Developed countries in general, and the U.S. in particular, spend a great deal of money on healthcare. As a result, healthcare organizations have a great deal of money to spend. This makes them lucrative customers for tech companies.
The following “big data” stocks are well-positioned for all of these trends:
Big Data Stocks: Medallia
Medallia specializes in artificial intelligence, or AI. But of course, AI is developed through the automatic analysis of large amounts of data. As a result, AI companies are really “big data” firms as well.
On its Q2 earnings conference call last month, Medallia CEO Leslie Stretch said, “Our new healthcare vertical saw intense activity in the quarter.” The company continued to expand its offerings for the healthcare sector, he added.
Those initiatives appear to be working, as the company, which has a market capitalization of just $4.6 billion, signed many impressive new customers in Q2. These include the UK’s National Health Service, the American Red Cross and “a top three global pharmaceuticals company.”
Medallia’s revenue and gross profit rose steadily in the past three years, and its top line jumped 21% year-over-year in Q2. These are indications that it’s still growing at a healthy pace, despite the pandemic. MDLA stock is trading at a trailing price-sales ratio of 9, which is not excessive for a rapidly growing tech company in today’s environment.
As the company’s name suggests, Health Catalyst is laser-focused on the healthcare space with products that collect and analyze data. This focus makes it one of the “big data” stocks to consider.
The pandemic had a mixed impact on the company and HCAT stock. CEO Dan Burton said that “usage of the company’s DOS platform, the heart of the company’s [intellectual property] has jumped sharply during the pandemic.”
Further, Burton reported strong demand for many solutions that the company developed to help healthcare institutions analyze data related to Covid-19. And he noted that the company signed a deal with one of America’s 20 largest health systems in Q2. On the negative side, demand for Health Catalyst’s consulting services declined.
And in an interesting move, the company decided not to charge existing customers for its new offerings related to the pandemic. Meanwhile, healthcare organizations that were not its customers only had to offset Health Catalyst’s “direct” technology costs in order to receive “a light version of [its] data platform bundled with [its] patient safety application suite inclusive of the COVID-19 specific public health surveillance module,” he said.
In Q2, Health Catalyst’s professional services revenue increased only 6% YOY, but total revenue climbed 18% YOY. However, its loss from operations jumped to $15.6 million, versus $9.36 million during the same period a year earlier.
Since August, when the company reported its Q2 results, HCAT stock rallied. Given the strong usage of the company’s platform and the high interest in its Covid-19 offerings, I expect its results to rebound meaningfully next year.
One of the most prominent big-data companies, Splunk says that it enables healthcare providers to perform several important tasks. These include “interact with the broader healthcare ecosystem,” “comply with regulatory requirements” and “deliver better information access to patients, payers and providers.”
The company added that it allows healthcare providers to analyze “electronic health record systems … and reduce risks and costs.” Finally, in August, it noted that a highly ranked hospital, Yale New Haven Health System, recently began using its Splunk Cloud and Enterprise Security product.
A Seeking Alpha columnist recently wrote that Splunk entered multiple fast-growing tech segments other than data: IT operations, security and cloud-based application performance monitoring. The author believes that the company’s revenue can increase at a 20% compound annual growth rate over the next decade.
Also upbeat on SPLK stock is research firm Evercore. On Oct 2, Evercore analyst Kirk Materne upgraded the shares to “outperform” and increased his price target to $250 from $235. The analyst thinks that “strong growth in subscription and the Cloud business” next year can cause the shares’ valuation to surge.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.