What’s the one concept that could make you a millionaire?
Longtime readers know the answer: big data equals big money.
Thanks to the widespread proliferation of internet-connected and data-collecting devices across the globe, companies of all shapes, sizes, and industries are swimming in large data sets today.
Analyzing this data using advanced AI-powered algorithms and analytics can reveal important patterns, trends, and connections. Intimately understanding these patterns, trends, and connections can help companies make better products, create better content, advertise more effectively, cut out unnecessary costs, and much more.
All of those things mean more money – and to that end, big data equals big money.
It’s that simple.
Of course, this trend matters because we are still in the first inning of the Big Data Revolution.
Globally, the big data market is expected to grow by 65% to $230 billion over the next five years.
During this growth renaissance, data-driven decision making will become the global enterprise norm. Everything businesses do – every decision they make – will be based on data, because doing so will allow them to make more money.
It doesn’t take a rocket scientist to understand the investment implication here…
Data analytics providers which help companies transform into optimized data-driven organizations will be huge winners over the next few years.
Today, we will tell you about one of these explosive data analytics providers. It’s a small healthcare technology company that is pioneering a breakthrough AI-powered solution which could radically change how we treat folks with behavior health (BH) issues – and along the way, turn into a huge success story on Wall Street.
Big Data + Big Savings = Big Growth
Did you know that one out of five people every year deal with a behavioral health issue, like addiction, depression, or anxiety?
That’s a tragic statistic. It’s also a costly one.
Chronic illness patients (think folks with diabetes, hypertension, coronary artery disease, and more) who concurrently deal with behavioral health issues, cost health plans up to 4.5X MORE than chronic illness patients who don’t deal with BH issues.
If only there was a way for health insurers to better identify patients with BH issues, treat these patients more effectively, and dramatically reduce their cost…
There is. Readers, meet Ontrak (NASDAQ:OTRK).
Ontrak is a small, $450 million health-tech company leveraging big data and AI to solve one of the health insurance world’s biggest problems: Better managing the costs and outcomes of patients with BH issues.
Specifically, the company sells its PRE (Predict-Recommend-Engage) platform to health insurers. As the name would imply, the platform follows a simple three step process:
- Leverage proprietary AI-powered identification algorithms to analyze patient data, and predict which chronic illness patients have untreated behavioral health conditions that could worsen their chronic medical disease.
- Leverage robust clinical and insurance claims data to recommend effective care pathways for those targeted BH patients.
- Employ a multi-modal approach (telephone, video, email, text, etc.) to engage BH patients and guide them through their care journey.
Through these three steps, the PRE platform enables health insurers to not just improve the outcomes of its BH patients, but also dramatically reduce the costs of treating these patients, by reducing the chance that such patients aggravate their chronic illness.
The numbers speak for themselves…
Ontrak’s customers – which already include big names like Aetna and Humana – have reduced their BH patient health costs by over 50%, on average.
The data here is crystal clear. Ontrak’s PRE-program works. The company is truly leveraging big data to drive big savings for big companies.
That’s a recipe for success.
In 2018, Ontrak’s revenues rose 88%. In 2019, they rose another 134%. In 2020, they rose 136%.
To be sure… as you probably have noticed by now if you’ve pulled up the Ontrak stock chart on a separate screen… this stock got absolutely pummeled yesterday.
That’s because revenue growth is expected to slow to just 20% next year, as the company announced that it will lose its biggest customer (likely Aetna), effective June 2021.
That’s a big loss. On a membership basis, that customer represents about half of Ontrak’s business – and the fact they are leaving raises concerns about whether or not other customers will follow suit.
But this situation reminds me of Twilio back in 2016. At the time, Twilio was a red-hot tech startup offering communication APIs to businesses looking to communicate with their customers. Their biggest customer at the time – Uber – left Twilio. The stock tanked.
But, as it turns out, there were some oddities in the Uber-Twilio partnership that made it non-representative of the company’s broader deal portfolio – and over the next few years, Twilio raked up a bunch more deals with a bunch more companies outside of Uber. The business remained red-hot and the stock soared more than 10X.
The same thing could happen here.
Ontrak’s deal with this big customer was not normal. The customer evaluated Ontrak on a provider basis (not a vendor basis as do all of the company’s other health plan partners). The customer also only allowed interaction with its behavior health division (and forbid interaction with its medical division). The customer also didn’t value Ontrak’s coaching model.
Overall, it wasn’t a normal deal – and I don’t think we should be looking at this loss-of-business as representative of the company as a whole, especially since Ontrak is re-signing and extending contracts for every other customer in its pipeline.
In that light, this looks a lot like the Twilio-Uber shakeout in 2016. If it plays out similarly, then Ontrak stock could soar from this depressed base.
So… if you’re looking to a buy a potential 10-bagger at discounted valuation… you should consider taking a position in Ontrak stock today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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