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Telehealth Stocks to Consider

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Key Takeaways

  • Some key players in the telemedicine industry that would be worth investing include Teladoc Health, 1Life Healthcare, WELL Health Technologies, and GigCaptial2.
  • Most of these corporations are positioned well for revenue growth and acquisitions of smaller, profitable companies to increase their popularity.
  • Two additional companies to watch in 2021 include American Well Corporation and 111.

Following the onset of the COVID-19, telehealth use surged, with many Americans opting to receive care from the comfort of their own homes as opposed to in-person visits. As a result, telemedicine companies are seeing exponential growth in sales; the current market opportunity for telemedicine in the United States could amount to $250 billion.1

For both first-time and veteran investors, adding a telemedicine company to your portfolio wmay be a smart financial decision. An article published in Arizton found that the U.S. telehealth market is expected to grow at a CAGR of 29% through FY2025.2 

The following are 4 solid options to consider when looking at telemedicine investment options:

  • Teladoc Health
  • 1Life Healthcare
  • WELL Health Technologies
  • GigCaptial2

 Notable mentions also include American Well Corporation and 111. 

Teladoc Health (NYSE:TDOC)

Rated number 1 for telemedicine investment options by multiple sites (The Motley Fool, Investopedia, and Investor’s Business Daily), Teladoc Health aims to be a one-stop platform for all virtual care needs, offering everything from physician consultations to behavioral health care to chronic illness management.1 Teladoc has been on a high-growth trajectory; for fiscal 2020, the company reported 98% revenue growth on a year-over-year basis, and for 2021, the company has guided for revenue growth of 81%.3  

In 2020, Teladoc provided patients with about 10.6 million medical visits, and more than 40% of Fortune 500 companies are now using its services. By 2023, the telehealth provider expects to increase its revenue and EBITDA to at least $3.45 billion and $591 million, respectively.1

Teladoc has positioned itself for substantial growth. In FY2020, Teladoc reported a 17% growth in international access fee revenue to $124 million.

Why you should invest: 3 While shares aren’t cheap (currently prices are around $141), the opportunities are enormous for Teladoc, which could increase business by integrating other healthcare operations that could be taken online. Plus, the analyst consensus rating of TDOC is a Moderate Buy, with 14 Buy ratings and 9 Hold ratings. For investors who plan to hold for at least 3 to 5 years, shares of Teladoc are a great way to invest in the future of medicine. The biggest unknown is how quickly that future will arrive.

1Life Healthcare (NYSE:ONEM)

This company is backed by Alphabet and is a provider of in-person as well as telehealth visits. For FY2020, the company reported net revenue of $380.2 million, which was higher by 38% on a year-over-year basis. Of note, 60% of the company’s total revenue was recurring in nature.

The company did report an EBITDA loss of $14 million for last year. Even for the current year, the company has guided for $10 million (mid-range) in adjusted EBITDA loss. 

Why you should invest: The company is backed by Google, so finances moving forward won’t be an issue. Plus, with the nationwide expansion of Amazon’s virtual health care pilot program, competition within the telemedicine industry is growing. 1Life may be in a prime position to focus on aggressive client acquisition and retention as opposed to positive cash flows. Moreover, this stock is in a sound financial position, with more than $660 million in cash and investments to offset $234.6 million of convertible debt liabilities. 

WELL Health Technologies (NYSE: WLYYF)

The leading telehealth service in Canada, WELL is a great option for investors looking to diversify their portfolio. Additionally, the stock trades at a market capitalization of $980 million and has the potential to grow substantially in the coming years.3 Specifically, the acquisition of U.S. company CRH Medical will help Well Health make inroads in the U.S. markets. CRH Medical has an annual revenue of $120 million with an attractive operating EBITDA margin of 40%.3

Well Health reported revenue of $50 million and turned its adjusted EBITDA positive in Q4 2020. However, the company is now expecting an annualized revenue of $300 million for the year.3 In January 2021, the company acquired Adracare, which provides telehealth, clinic management, and software-related services in 5 countries. 

WELL was one of the top-performing stocks on the Toronto Stock Exchange (TSX) last year and has returned 380% since the end of March 2020. Additionally, WELL stock has generated returns of 7000% after its IPO. 

Why you should invest: Well Health’s acquisitions of two key players in the telemedicine industry in terms of regional diversification, especially with Adracare’s presence in 5 countries. Even after an upside of more than 400% in the last year, Well Health’s stock is a solid choice. 

GigCapital2 (NYSE:GIX)

This company has acquired UpHealth and Cloudbreak, which will create one of the biggest telemedicine companies in the U.S. under the name UpHealth. The platform will provide virtual consultations, global telemedicine, telepsychiatry, and online pharmaceutical services, and the acquisition with Cloudbreak will add a team of medical interpreters who can assist with virtual health care visits in over 250 languages. This will position UpWork to stream internationally.

The merged name will officially become UPH. Last year, UpHealth and Cloudbreak brought in a combined revenue of $115 million, and both were profitable overall. In 2021, the post-merger entity is forecast to increase that number to $194 million, and management expects accelerated growth to bring that figure to $346 million in 2022.1 

Additionally, GigCapital2, Inc. was in 14 hedge funds’ portfolios at the end of September 2021 Historically, investors who follow the top picks of the elite investment managers can outperform their index-focused peers.

Why you should invest: The share price is on the cheaper end, which sets the company up for a potentially huge gain if the merger is finalized. UpHealth will bring additional benefits to the platform, such as prescribing capabilities in all 50 states.1 If the merger completes, the two companies will have $105.5 million in cash net of debt and a combined enterprise value of $1.35 billion. At current share prices, that only represents a valuation of 7 times revenue.

Honorable Mentions: AMWL and 111

American Well Corporation (AMWL) and 111 YiYaoDian (YI) are on the honorable mention list for a few reasons. This isn’t to say that these stocks aren’t worth investing in, but first-time investors may want to know some additional details about these companies before committing to invest. 

American Well Corporation has lowered its stock in 2021 by 26% due to the second public offering in January.3 But, the company has a strong growth record; they reported a revenue of $245.3 million in 2020 compared to $148.9 million in FY2019.  The company has guided for EBITDA level loss of $152 million for the year. Cash burn is also a concern even as the company has ample liquidity buffer. Therefore, AMWL should be kept on the radar, especially as the cash buffer could open opportunities for acquisitions. 

111 is a leader in the online pharmacy industry in China. It delivers a wide array of pharmaceutical products to customers’ doorsteps. Management is nearing its goal of extending its reach to more than 300,000 pharmacies in China — 57% of the country’s total, serving more than 1 billion people. The prescription medicine market in China amounts to 300 billion yuan (approximately $46 billion) annually.1 The company is growing tremendously, having delivered 8 consecutive quarters of growth.1 However, many people are still skeptical about investing in Chinese-based companies (thanks to the Luckin Coffee scandal from 2020). Again, this brand is worth keeping in mind, especially as they continue to expand in China and bring in additional revenue per quarter. 

References

  1. Sun Z. The 3 best telehealth stocks to buy now. The Motley Fool. Published February 17, 2021. Accessed May 10, 2021. 
  2. U.S. telehealth market – industry outlook and forecast 2021-2026. Arizton. Published May 2021. Accessed May 10, 2021. 
  3. Humayun F. 4 telehealth stocks for healthier returns this year. InvestorPlace. Published April 1, 2021. Accessed May 10, 2021. 

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