The Covid-19 pandemic has significantly impacted the way people are living their lives these days. This has led to a number of behavioral changes in the life of the average consumer, and one new aspect that has particularly gained importance is the use of zero-contact solutions. Consumers and businesses alike are looking to minimize contact with others as far as possible, whether through grocery delivery, healthcare, or payment solutions.
This "zero-contact wave" is likely here to stay for a while, and there are a number of companies providing solutions within this space that could heavily benefit from this new consumer behavior. Here are some of my picks.
Phreesia Inc.
The need for contactless healthcare services, particularly with the capacity of healthcare facilities being used heavily by Covid-19 patients, has pushed many consumers to telehealth providers. However, telehealth is not a solution for all kinds of healthcare issues and many patients continue to require in-person care.
This is where Phreesia (PHR, Financial) comes into the picture. The company is a service provider to healthcare facilities, and its offerings include a complete zero-contact patient intake. Phreesia helps patients have a contactless check-in to waiting rooms and carry out the registration process in the comfort of their home. It also handles the complete paperwork of patients, including proof of identification, insurance and payments, with minimal contact through its proprietary Phreesia platform. For healthcare facilities, this is a holistic patient activation and support solution.
Phreesia's stock has also had an excellent run over the past six months with a 63% appreciation. Its valuation may seem pricey at an enterprise-value-to-revenue ratio of 8.68, but the company has a lot of cash on its balance sheet with a cash-debt ratio of 3.34, implying it has room for strong growth initiatives by the management in the coming future. It certainly looks like an interesting company to watch out for in the future.
Target Corp
Target (TGT, Financial) has been one of the best-performing retailers in the past six months with its stock price appreciating by as much as 55%. While retail as a sector has been rock solid throughout the crisis, Target has also been addressing the zero-contact grocery shopping requirement of customers through Shipt, its grocery delivery and pickup service. Shipt operates on a membership model costing $99 a year or $14 a month and includes free deliveries of orders over $35 or more. Thus, the company is able to lock in its customers and ensure that they only order through Target stores or through its partners.
The company has scale as Shipt can deliver across more than 260 American cities and is fast enough to provide deliveries on the same day and sometimes even within an hour after the order is placed. By locking in customers through Shipt, Target is becoming a strong competitive force against larger retailers like Walmart (WMT, Financial) and Amazon (AMZN, Financial) who also offer similar services.
The Target management has smoothly executed Shipt with the use of independent contractors to shop for its consumers at Target and its partner stores and provide maximum possible convenience to consumers at practically zero-contact. Despite its huge jump in stock price, Target still trades at around a 1.06 enterprise-value-to-revenue ratio and a 12.01 enterprise-value-to-Ebitda ratio. These are certainly not the highest multiples across the industry and with Shipt gaining momentum, Target could well have further upside.
OLB Group
With the zero-contact wave, even the smallest B2C service providers, whether it is provision stores, restaurants, or snack bars, are trying to provide contactless payment solutions to their customers.
Fintech companies have a big role to play in this, and OLB Group (OLB, Financial) is currently one of the most attractive stocks within this sector. The company is targeting batches of the smallest sized merchants which do not fall under the radar of giants like Square (SQ, Financial) and helping them provide contactless payment solutions. It has tie-ups with all the major payment companies such as MasterCard (MA, Financial), Visa (V, Financial), American Express (AXP, Financial) and PayPal (PYPL, Financial).
Over and above its contactless payment processing solutions, the company is also helping small traditional retailers go online through its e-commerce consultation solutions. Its target group of merchants is smaller than the average size of Shopify's (SHOP, Financial) clientele, implying that the company is going to the grass root levels in the economy. Despite the smaller size of its merchant base, OLB Group is profitable with a positive Ebitda margin of nearly 10% as per its most recent filings. With its recent round of fundraising, the company is well-equipped for future growth and is an interesting bet for microcap investors with a high risk appetite.
Applied UV
Applied UV (AUVI, Financial) certainly deserves an honorable mention in this list. The recently listed microcap's offerings are complementary to those of Phreesia within the healthcare space. Applied UV supplies disinfecting mirrors, sinks and drains to healthcare facilities so that patients entering the facility have a minimal risk of contracting Healthcare Acquired Infections (HAIs).
The company's proprietary SteriLumen Disinfection Technology has a wide application and it is also supplying these products to the hospitality industry in the U.S. and the Middle East. While its offerings may not be a part of the zero-contact domain, its technology certainly appears promising as the management looks to go B2C in the near future, supplying these products to consumers after building a distribution network in the U.S.
The good thing about the company is that it is already profitable even at its current scale with a 28.72% net margin. Its price-earnings ratio of 29.85 also appears reasonable for a high-growth, tech-adjacent stock, and it looks like a decent pick to me at current levels.
Final thoughts
Each of the above-mentioned companies faces strong competition as more and more players are trying to address the zero-contact requirement of today's consumers. However, when we analyze the current valuation as well as the growth potential of each of these players as compared to their peers, they appear to be very lucrative investment opportunities at their current levels, in my view.
Disclosure: No positions.
Read more here:
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- OLB Group: A Hidden Fintech Gem
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