3 Telehealth Stocks to Watch Amid the Coronavirus Crisis
Given the extreme volatility of the stock market amid the coronavirus chaos, you may think there are no strong bets in the market today. But here’s a play that should be a stable bet for the foreseeable future: telehealth stocks.
Telemedicine is the way of the future. It enables patients to receive examinations, diagnoses and treatments all from the comfort of their homes. They can meet with a doctor via video link, the same way a remote worker videoconferences for their job.
Now more than ever it will be important for doctors to be able to treat their patients from a distance. And as more jobs and industries telecommute, medicine will be sure to follow. Let’s take a deeper dive into why telehealth stocks will be a strong stock play going forward.
The Growth of Telemedicine
The medical industry was slow to adopt telemedicine technology. This is understandable. Medical professionals felt they needed to see their patients in person to provide them with the best treatment.
But that sort of thinking is becoming old-fashioned and, frankly, outdated. Some 15% of physicians now work with organizations that offer telemedicine services. That number is only going to go up amidst the global pandemic frenzy.
To break it down even further, telemedicine is used by…
- 40% of radiologists
- 24% of cardiologists
- 28% of psychiatrists
- 39% of emergency room doctors.
Again, those numbers are sure to grow. This will increase the value of telemedicine stocks moving forward.
Every single state in the nation, as well as the District of Columbia, now allows telemedicine. Medicare and Medicaid allow it. And not only do most insurance companies allow it, but most even offer their own telehealth services.
The cheaper cost of telemedicine for patients is also worth noting. Most telehealth services cost between $45 and $50 for a 15-minute video visit, although they can be higher than that. Compare that with the following rates:
- Office visits for primary physicians and specialists: $125
- Urgent care visits: $300
- Emergency room visits: up to $1,000 or more.
Even if the coronavirus were not an issue, the attractive cost savings would be appealing to the typical healthcare consumer.
BREAKING: I just signed legislation to expand access to telehealth services and expedite licensure of out-of-state professionals.
By allowing New Jerseyans to receive care from the safety of their own home and fast-tracking temporary licenses, we’ll curb the spread of #COVID19.
— Governor Phil Murphy (@GovMurphy) March 20, 2020
3 Telehealth Stocks to Watch
The market for telemedicine was valued at $29.6 billion in 2017. It is expected to have a compound annual growth rate (CAGR) of 19% between 2017 and 2022. According to the “Global Telemedicine Market Outlook 2022,” sources of growth will include increasing adoption of telehealth technology, rising cases of chronic diseases, a growing elderly population, government spending and initiatives, and a shortage of doctors.
Here are three telehealth stocks you should be paying attention to as 2020 rolls on:
- Teladoc Health Inc. (NYSE: TDOC) – Teladoc Health happens to be the only pure-play telehealth stock in the United States. Over the past year, the stock has seen its share price grow from $48.57 to about $167 for a gain of about 244%. And over the last month, the stock has grown from $114.26 to its high of $167. The company has not been profitable over the past year, although its quarterly losses have shrunk from negative $30 million to negative $19 million, while revenues have grown each quarter and year over year. In addition to telehealth services, the company also makes use of analytics, artificial intelligence, medical opinions and licensable platform services.
- Humana Inc. (NYSE: HUM) – The insurance powerhouse Humana offers exposure to telemedicine through its Humana at Home and Kindred at Home programs. Insurance companies have been increasing their exposure to telehealth, and Humana is one of those companies that are taking advantage of the trend. Unfortunately, after growing alongside the stock market for the last year, Humana crashed along with it. The stock has dropped from its high of $385 all the way to $214.43 yesterday. On the bright side, its revenues have been consistent each quarter at about $16 billion and its earnings have been $500 million or more each of the last four quarters.
- CVS Health (NYSE: CVS) – CVS has its own telehealth business called MinuteClinic. In 2018, the pharmacy giant entered into a $69 billion merger with insurance company Aetna. Aetna also offers its own telemedicine services. Like Humana, CVS Health was hurt by the stock market crash. Over the last year, the stock climbed to a high of $77.03 and then plunged to $53.09 as of yesterday. On the plus side, the stock is now trading at a relatively cheap price-to-earnings (P/E) ratio of 10.44. Over the last year, the company has had consistent revenues in the $60 billion range and has put up more than $1.5 billion in earnings each quarter. The company also has a healthy $5.68 billion in cash on hand.
Telehealth stocks are a strong bet in the current market environment. And even once the coronavirus crisis is over, telemedicine is likely to become increasingly popular.
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About Brian M. Reiser
Brian M. Reiser has a Bachelor of Science degree in Management with a concentration in finance from the School of Management at Binghamton University.
He also holds a B.A. in philosophy from Columbia University and an M.A. in philosophy from the University of South Florida.
His primary interests at Investment U include personal finance, debt, tech stocks and more.