Before the coronavirus struck, telemedicine was a speculative growth industry that had great potential. Now, it is the hottest sector on Wall Street.
Back in January we were talking about Disney (NYSE: DIS) having potentially the greatest year of its existence, while Zoom (NASDAQ: ZM) was just another tool I used sparingly in work. Now, at-home stocks such as Zoom and Slack (NYSE: WORK) are tearing up the market, while Disney is losing billions due to park closures. And while Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Google (NASDAQ: GOOG) are still the biggest names in business, alongside Amazon’s (NASDAQ:AMZN) e-commerce dominance, other players have joined the rat race at the top.
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One sector which has benefited mightily from the unfortunate rise of this pandemic is telemedicine. A sector which, 2 months ago, was regarded as ‘one for the future’, is now exploding due to the sudden need for ‘medicines sans toucher’, which has accelerated the industry’s growth.
How big will telemedicine grow?
Telemedicine is the distribution of health-related services and information via digital platforms such as video, allowing for doctors’ visits from a distance. So, you can see why people might be interested in such a service right now!
The telehealth industry is expected to be worth $185.66 billion by 2026, with a CAGR of more than 18%. Valued at just over $45 billion in 2019, that is a lot of room for growth among the biggest players, such as Teladoc (NYSE: TDOC) or Phreesia (NYSE: PHR).
How are the biggest telehealth names performing?
They’re thriving! Since mid-February, the S&P 500 (NYSEARCA: VOO) has fallen more than 10%, while Teladoc and One Medical (NASDAQ: ONEM) have climbed roughly 50%, and Livongo (NASDAQ: LVGO) has almost doubled.
It’s no wonder too if you just take the fact that Teladoc’s monthly visits jumped 92% in Q1 to more than 2 million virtual visits, and that was before the pandemic really took hold across Western society. For Q2, the company has set guidance in the range of $215 million to $225 million, while servicing between 2.3 million to 2.4 million visits.
One Medical, which provides a subscription service, saw both revenue and membership jump 25% year-on-year in Q1. With 455,000 members as of the start of Q2, One Medical expects to add between 10,000 and 30,000 new subscribers to the service.
Livongo saw Q1 revenue jump 115% year-on-year to $68.8 million, while membership enrollment increased 100%. The California-based company also expects Q2 to be a quarter of growth, with the guidance showing expected revenue in the range of $73.0 million to $75.0 million.
Is telemedicine’s growth sustainable?
It would be easy to dismiss this growth as temporary due to the presumed production of a vaccine within the next year. When restrictions are no longer required, will telemedicine demand simply fall? Companies such as Netflix (NASDAQ: NFLX) and Facebook (NASDAQ: FB) have already touched on this possibility for their respective sectors, but telemedicine will likely be different for a number of reasons.
- It is much more convenient for a sick person to consult a doctor from the comfort of their home than to travel for an appointment.
- A post-COVID world will have left scars and people are going to be much less inclined to spend time in a cramped doctor’s waiting room.
- Telemedicine is far more cost-effective in the long run, leading to quicker, more efficient visits for minor ailments, reduced utensil use for doctors, and the reduction in facility size.
- Telemedicine is increasingly becoming part of insurance plans, leading to higher usage.
- It will reduce the risk of further complications related to illness by reducing exposure.
No matter what virus is plaguing the planet, people still need medical help, and telemedicine is the next big thing in the $12 trillion global healthcare industry. This toothpaste is not going back into the tube and will be the new normal after the coronavirus pandemic subsides.
Should I invest in telemedicine stocks?
As it stands, Teladoc is actually the only publicly traded ‘pure-play’ in the telemedicine market, while companies mentioned above, as well as the likes of UnitedHealth Group (NYSE: UNH) and Humana (NYSE: HUM), offer telehealth as yet another service of their wider portfolios.
This gives it a distinct advantage over other pure plays which have yet to go public, as it is getting in at a time where its services have never been needed more. This has led to its stock growing and thus bringing in more buyers, increasing its value. It is early days yet for the telemedicine industry, and while it has experienced rapid growth recently, Teladoc still remains a solid bet in the stock market with plenty of room to expand in the future.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in StoneCo. Read our full disclosure policy here.