Investors currently have only one pure option to capitalize on the explosive growth in telemedicine – Teladoc Health Inc. (TDOC, Financial). But the stock has become expensive. Shares of the Purchase, New York-based company have more than tripled to nearly $170 over the past year as the company’s price-sales ratio has soared to a lofty 24.
Yet when you look at the rapid expansion of telemedicine in the past few months and longer-term forecasts for the business, buying into the industry leader might still make sense.
Consumers and providers have turned to telehealth during the Covid-19 epidemic as both parties sought to avoid face-to-face visits for practical and safety reasons. According to a McKinsey & Co. survey conducted in April, consumer use of telehealth exploded during the pandemic, going from just 11% of U.S. consumers using it in 2019 to 46%. Moreover, a report said a quarter of a trillion dollars in current U.S. health care spending could now be done virtually.
The size of the opportunity is forecasted to be huge. The demand for telehealth is expected to grow at nearly a 17% average annual rate, from $25.4 billion in 2020 to $55.6 billion in 2025, according to Markets and Markets.
Other public companies have made telehealth part of their portfolios. Humana Inc. (HUM, Financial) offers Humana at Home and Kindred at Home, while CVS Health Corp. (CVS, Financial) is capitalizing on the trend though its telehealth business called MinuteClinic. CVS also gained Aetna’s telemedicine services when it merged with the company in 2018.
The other telemedicine players are small, up-and-coming companies that investors might want to keep an eye on. Among them are a number of companies named in an article in PlugandPlay:
- Nutrimedy is an early-stage startup that improves the care delivery model for clinical nutrition using a telehealth-enabled web and mobile platform, where clinical dietitians can deliver personalized care outside the hospital walls for over 50 conditions
- GYANT offers chat-based products that use artificial intelligence to collect and analyze patients’ medical history and to help users navigate complex health care products and services
- Hale Health connects clinical teams and their patients between visits. The company is building a remote care platform that can handle all of a patient’s health care needs – from acute issues to complex disease management – to ensure everyone can easily access the medical help they need
Others vying for a piece of the market are Zipnosis, SnapMD, Heal and Psyalive.
The greatest growth potential still lies with Teladoc and its privately-held partner Tylo, according to an early May article in Forbes. Tylo makes a home health monitoring device that sends results to medical professionals. The company’s revenues tripled in 2019 and CEO Dedi Giilad expects them to grow two-and-a-half times this year. In April, Tylo raised $50 million, bringing its total capital to $105 million.
Teladoc had a strong first quarter even though it missed analysts’ forecasts. Sales came in at nearly $180.8 million, just a fraction below what was expected, according to Zacks. The company lost 40 cents a share.
Teladoc visits nearly doubled to just more than 2 million and paid memberships climbed more than 60% to 43 million during the first three months of the year. In the second quarter, the company said that its revenue would be between $215 million and $225 million; it would lose between 23 cents and 28 cents a share; and total visits would range between 2.3 million and 2.4 million with U.S. paid membership somewhere between 49 million and 50 million.
Disclosure: The author holds no positions in any of the stocks mentioned in this article.
Read more here:
- AstraZeneca Ranked Most Inventive, Roche Most Innovative
- Gilead Continues to Build Cancer Franchise
- Venture Funding of Drug Startups Down, but Not Out
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
