It might be convenient to think of telehealth as a remnant of the pandemic, a new way of doing things that will quickly disappear when things go back to normal. That’s missing the bigger picture. Telehealth was growing by leaps and bounds even before COVID-19 forced many of us to connect with healthcare professionals virtually.
With so many companies now touting elements of remote care, it can be hard for investors to choose how to get exposure to this burgeoning industry. That’s why I’m highlighting Teladoc Health (NYSE:TDOC) and Doximity (NYSE:DOCS). They each represent different technologies that are changing the healthcare landscape. And they could be great stocks to buy and hold for many years to come.
Teladoc is probably the most famous telehealth company. Not only is it the largest — with a market capitalization of $21 billion — it’s also made the most headlines. That’s primarily due to a history of acquisitions. Its biggest was the purchase of digitally focused chronic care manager Livongo last year for $18.5 billion. The company has since signed up Proximie as a partner to support surgical procedures from afar and rolled out virtual programs to offer primary care and hospital-at-home. It’s part of the company’s push to cover every step of the patient journey — even remote monitoring after returning home. Management is calling it “whole person care”.
The stock saw a huge run during the first few months of the pandemic as Wall Street anticipated big profits from the shift to virtual visits. After the purchase of Livongo — a company about the same size as Teladoc when the deal was consummated — and the roll out of vaccines, the stock has been in a precipitous decline. It’s now down 54% from its high early this year.
It’s likely a short-term hangover from last year’s windfall. Teladoc is on pace to deliver 13.5 million visits in 2021 and has projected revenue of more than $2 billion. That’s up 83% from last year. However, it still isn’t predicting a profit without accounting adjustments. In fact, it’s never produced an annual profit. That will need to change if the company is going to fulfill its potential for shareholders.
Management has made the right moves to create an alternative to the cumbersome and expensive traditional healthcare experience. If it can prove it’s a recipe for profits Teladoc shares should offer a great return over the long term.
Doximity is taking a different approach to transforming healthcare. While Teladoc is focused on patient access, Doximity works to make the lives of those caring for patients easier. It is a digital platform providing tools purpose-built for doctors to collaborate with colleagues, connect with patients, and conduct virtual visits. It also allows them to manage their careers and stay up to date on news that is most relevant to them. It’s very popular. Doximity claims to have 80% of doctors and 90% of graduating medical students in the U.S. already signed up.
The company makes money by selling subscriptions for one of two purposes. The first allows healthcare companies to advertise on its platform. That’s a big deal for pharmaceutical companies that want to make sure the right doctors are aware of their products. The second is recruitment and hiring. That module enables customers to post open roles. Doximity also bought Curative Talent earlier this year and stepped into medical recruitment services.
In April of 2020, the company launched a telehealth solution including its video and voice dialer. That tool allowed providers to easily connect with patients. Its paid telehealth platform now serves nearly one-third of all U.S. physicians. It might surprise you to learn Doximity delivered over 63 million telehealth visits in its fiscal 2021 — that’s April 2020 to March 2021. Over the same period, Teladoc facilitated 26 million.
For its fiscal year ending March 2022, Doximity is projecting close to $300 million in revenue. That would be 44% more than the previous year. Breaking the mold of fast-growing companies losing money, it actually reported net income of $26 million for the first half of the year. It adds up to something for all kinds of investors. A widely used platform, robust growth, and real accounting profits make Doximity one of the best plays to take advantage of the migration to remote care.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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