Markets in 2020 put the limelight on several sectors, such as healthcare, where shares of telehealth companies have gained significant attention. The World Health Organization (WHO) says more than 48 million cases of the novel coronavirus were confirmed and the death toll stands well over a million people worldwide. Today, we will introduce three telehealth stocks that may be appropriate for a range of portfolios during the second wave of the pandemic.
Recent research led by Dr. E. Ray Dorsey of the University of Rochester Medical Center in Rochester, New York, states, “Telehealth is the provision of health care remotely by means of a variety of telecommunication tools, including telephones, smartphones, and mobile wireless devices, with or without a video connection. Telehealth is growing rapidly and has the potential to transform the delivery of health care for millions of persons.”
The global digital health market is expected to grow from $106 billion in 2019 to $639 billion in 2026. According to Polaris Research, in the U.S., the sector is expected to grow from $6.61 billion in 2019 to $25.88 billion in 2027. Many people who have not considered telemedicine yet will likely do that in the future.
Telehealth is not a new concept. The history of the American Telemedicine Association (ATA), a non-profit association headquartered in Washington D.C., goes back to 1993. According to ATA, more than half of U.S. hospitals have a telehealth program. These technology-enabled healthcare services range from assessment to monitoring, education, and prevention.
With that information, here are three telehealth stocks to buy for long-term portfolios:
- American Well (NYSE:AMWL)
- Global X Telemedicine & Digital Health ETF (NASDAQ:EDOC)
- Teladoc Health (NYSE:TDOC)
Telehealth Stocks: American Well (AMWL)
First on our list of telehealth stocks is Boston-based American Well, which is rebranding as Amwell. The group began in 2006 and its IPO was in September 2020. The stock’s initial price was at $18 and opened at $25.51 per share.
According to a recent SEC filing, Amwell, derives revenue “from multiple stakeholders, including health systems, health plans, government clients and healthcare innovators.”
Its “revenue was $69.1 million and $122.3 million for the six months ended June 30, 2019 and 2020, respectively, representing a year-over-year growth rate of 77%.” However, the company is not yet profitable as it “incurred net losses of $41.6 million and $113.4 million for the six months ended June 30, 2019 and 2020, respectively.”
Since going public, AMWL stock is up about 25%. In early October, it hit an all-time high of $41.80. It is still a young stock without much trading history. Given the increase in the recent reliance on telehealth, the stock is pricey. P/S and P/B ratios stand at 22.71 and 14.81.
Amwell is expected to report Q3 earnings on Nov.13. Therefore, the shares may be volatile around the time. Investors may consider buying the shares on pullbacks. With a market-capitalization of about $5.8 billion, the company has a lot more room to grow.
Global X Telemedicine & Digital Health ETF (EDOC)
Next is an exchange-traded fund, the Global X Telemedicine & Digital Health ETF. The fund gives access to firms that provide services in telemedicine, healthcare analytics, connected healthcare devices and administrative digitization. The fund started trading in July 2020.
EDOC, with 39 holdings, tracks the Solactive Telemedicine & Digital Health Index. Most of the businesses are U.S.-based (82.3%), followed by Japan, Hong Kong, and Germany. The top 10 companies comprise about half of net assets, which stand at $400 million. Teladoc Health, a Japan-based digital health company M3, which also also has units in China, India and France, and iRhythm Technologies (NASDAQ:IRTC) lead the names.
Since inception in July, EDOC is up more than 7%. Its trailing P/E and P/B ratios stand at 78.48 and 8.77, respectively. We believe this ETF deserves to be on your watchlist for telehealth stocks. Many of the companies in the fund are likely to continue increase revenue and grow, possibly double-digits.
Teladoc Health (TDOC)
Purchase, New York-based provider of digital healthcare services Teladoc Health is about to become a household name stateside and is next on this list of telehealth stocks to buy. The company began in 2020 and grew organically and through acquisitions. The latest deal was the merger of Livongo Health, which specializes in diabetes management.
The company’s IPO was in July 2015, when it was trading around $30. TDOC shares started 2020 around $80 and had a stellar run-up during the year. In fact, in early August, the company hit an all-time high of $253. Since the start of the year, the stock is up about 150%.
Recent Q3 metrics showed revenue of $288.8 million translating into a growth of 109% YOY. During the quarter, there were 2.8 million visits over the platform, an increase of 206%. However, Teladoc is not yet profitable. Net loss was $35.9 million, or 43 cents per basic and diluted share.
From a valuation point, TDOC shares are not cheap. P/S and P/B ratios stand at 18.40 and 13.52, respectively. A potential decline toward the $180 level would improve the margin of safety for long-term investors.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for more than two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination.