Telehealth stocks are now cooling off after historic highs this year. The novel coronavirus pandemic pushed these companies to the forefront, but now Pfizer (NYSE:PFE), BioNTech (NASDAQ:BNTX), and Moderna (NASDAQ:MRNA) are taking the spotlight with their vaccines. But that doesn’t mean you should ignore telehealth stocks completely.
Physicians and other health professionals are seeing 50 to 175 times the number of patients remotely, and this trend will continue after the pandemic. Covid-19 will not disappear in a matter of weeks. Dissemination of the vaccine will take time, and only essential healthcare workers will get first preference.
A national Press Ganey survey that returned 1.3 million completed patient questionnaires revealed some interesting facts regarding telemedicine’s volume. Of the 154 medical practices surveyed between January and August 2020, telemedicine visits peaked at an estimated 37% of all encounters in early May, fell to 22% in early July, before stabilizing around 15% by mid-August — far and away pre-pandemic numbers of less than 1%.
Although I believe telemedicine is a secular trend, you have to admit that Covid-19 has amplified its adoption. And the numbers bail me out here.
Naturally, investors want to play this trend. However, not every company out there is a multi-bagger. That’s why we’ve curated the top telehealth stocks today:
Telehealth Stocks: Global X Telemedicine & Digital Health ETF (EDOC)
Global X ETFs launched the Global X Telemedicine & Digital Health ETF on July 30. Since then, it has had one of the most impressive growth stories among this year’s rookie exchange-traded funds.
From its launch till now, shares are up 19.9%. With McKinsey & Company estimating that $250 billion of health care spending could be virtualized via telehealth solutions, it will only grow from here.
EDOC invests in telemedicine, health care analytics, connected health care devices and administrative digitization. It tracks the Solactive Telemedicine & Digital Health Index.
Teladoc Health (TDOC)
The next entry is the first and largest telemedicine company in the United States. Launched in 2002, Teladoc offers telehealth, medical opinions, AI and analytics, and licensable platform services.
Year-to-date, TDOC stock is up 136.8% versus the industry and S&P 500 returns of 74.9% and 16.2%, respectively. It recently merged with Livongo Health, a combination Matt McCall referred to as a “masterstroke.”
The markets felt TDOC overpaid, leading to a 10% drop in sales, but the ace analyst allayed those concerns:
Even if Teladoc did overpay, it made a merger that made a ton of sense strategically. Teladoc’s platform and Livongo’s base of patients managing chronic conditions are perfectly complementary. And the underperformance even since the post-announcement plunge suggests another factor is at play.
Sales growth for next year is expected to be 81.5%. If you feel that it’s ambitious, remember that the first quarter saw year-over-year revenue growth of 41%, 85% in Q2, and more than doubled in the third quarter.
American Well (AMWL)
One of the more interesting IPOs this year was Boston, Massachusetts-based Amwell. Amwell is a telehealth system that facilitates a wide variety of healthcare services to be delivered remotely. Its clients include health systems, health insurance plans, employers, and partners & retailers. In 2019, 84% of total revenue was recurring billing, driving a lot of interest in the stock.
And as Vince Martin said, after the recent pullback, the valuation is exciting when coupled with American Well’s impressive growth. Revenues grew more than 30% in 2019 and have increased over 77% in the first six months of 2020.
AMWL stock becomes an exciting prospect to keep your eyes on.
CVS Health (CVS)
CVS Pharmacy is one of the largest retail corporations in the United States. It’s such a large and profitable enterprise that had the pandemic not occurred, it would still be doing quite well.
However, the virus has caused an immense interest in its products and clinics. During the early months of the pandemic, CVS saw a dip in new prescriptions as people went for fewer appointments. But in September, the company saw increased activity as members refilled 90-day prescriptions. Flu vaccines spiked in September and October, signaling that the population was becoming more responsible and getting back to normal with reopenings.
On the telemedicine side, CVS Health reported a 600% increase in its retail health clinics’ use through telehealth facilities and a big jump in home prescription delivery. “Utilization of telemedicine for virtual visits through MinuteClinic is up about 600% compared to (the first quarter of 2019),” CVS chief executive Larry Merlo told analysts on an earnings call.
With the pandemic set to wear off, this is a very stable play with a diversified revenue base.
Koninklijke Philips (PHG)
Dutch multinational conglomerate, Koninklijke Philips, was formerly one of the world’s largest electronics companies but is currently focused on health technology. The company was founded in 1891 by Gerard Philips and his father Frederik, with their first product being light bulbs.
Philips is producing AI-powered solutions to improve patient monitoring, precision diagnosis, and clinical workflows. With the strong growth and faster adoption of telehealth and policy changes due to the pandemic, it’s no surprise that experts are forecasting $23.24 billion in sales this fiscal year.
Shares are trading at 24.24 times forward price-to-earnings, while the industry is trading at 35.83 times.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan is a contributing author for InvestorPlace.com and numerous other financial sites. A former data journalist at S&P Global Market Intelligence, he’s passionate about helping retail investors make more informed decisions regarding their portfolio.