According to the Global X Telemedicine & Digital Health (NASDAQ:EDOC) website, the global telehealth market grew by 35% in 2020 to more than $55 billion. By 2028, it’s projected to reach $300 billion. Given the size of the market and its growth potential, it’s no wonder investors are interested in knowing about the best telehealth stocks to buy.
The ETF tracks the performance of the Solactive Telemedicine & Digital Health Index, a collection of stocks involved in telemedicine, healthcare analytics, connected healthcare devices, and administrative digitization.
EDOC currently holds 39 stocks with weightings ranging from 6.10% to 0.18%. Two of my three telehealth stocks to buy are owned by the ETF.
Approximately half the world’s population lacks essential healthcare services. These three companies are working to change this situation. Be a part of the solution by investing in one of them.
Best Telehealth Stocks: Cigna (CI)
Cigna (NYSE:CI) is not one of EDOC’s 39 holdings. However, it should be due to its $2 billion acquisition of MDLive in April 2021. The insurance and healthcare solutions provider first invested in telehealth provider MDLive in 2018. According to Page 94 of its 2021 10-K, Cigna valued its initial investment at $55 million.
Cigna’s Evernorth division completed the acquisition. The division’s chief operating officer had this to say about MDLive:
“By bringing MDLIVE into Evernorth, we have a highly complementary platform that will rapidly expand our capabilities to deliver greater affordability, predictability and simplicity for our customers and clients,” Fierce Healthcare reported Palmer’s comments in April 2021.
In Q1 2022, Evernorth generated $33.6 billion in revenue and $1.3 billion in adjusted pre-tax operating income. They were 10% higher than Q1 2021. Cigna expects Evernorth to generate $6.1 billion in adjusted pre-tax operating income for 2022. That’s almost 87% overall.
Cigna is a much safer way to play telehealth if you’re a risk-averse investor.
Doximity (NYSE:DOCS) isn’t a telehealth provider, but I included it because it’s a very profitable business and one of the holdings in EDOC. Known as “LinkedIn for Doctors,” more than 80% of physicians use its communications platform.
The company’s been a public company for over a year. It went public in June 2021 at $26 a share. Despite its share price declining 62% from its September 2021 52-week high of $107.79, it is still up 58% from its IPO.
In fiscal 2022, Doximity’s revenue was $343.5 million, 66% higher than a year earlier. On the bottom line, it earned 82 cents on a non-GAAP basis, 215% higher than 2021. For all of 2023, it expects to grow revenue by 33%. Its guidance for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is $194 million, 29% higher than in 2021.
The 13 analysts covering Doximity give it an “overweight” rating and an average target price of $47.25.
Best Telehealth Stocks: Amwell (AMWL)
Amwell (NYSE:AMWL) rebranded its business in March 2020. The Boston-based telehealth provider used to be known as American Well. It is the smallest business of my three stock picks, with a $1.2 billion market capitalization.
The company’s May 2022 presentation projects that it will grow revenues by 20% annually through 2025. Like many telehealth businesses, it’s not yet profitable. It expects to become profitable in the second half of 2025.
That’s a big reason its share price is in penny stock territory. Its stock is down more than 60% in the past year. Amwell went public in September 2020, selling 41.2 million shares at $18, well above its pre-IPO pricing of $14 to $16. Its stock closed its first day of trading up 28%. Since the beginning of 2021, it’s been all downhill.
In May, the company launched the Amwell Comprehensive Behavioral Health Program. It provides payers and providers with an integrated healthcare solution that includes virtual therapy, psychiatry, and coaching. Given all the mass shootings in the U.S. in 2022, personalized digital mental health is needed now more than ever.
None of the 15 analysts covering AMWL rate it a “sell” or “underweight.” The average target price is $4.95.
Amwell is the riskiest of the three.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.