Heal From Home: Top 5 Telemedicine Stocks (November 2023)

Improving Health Consultation

Medicine has always been centered on the patient-doctor relationship. Everyone can relate to the need to have a person listen to whatever is wrong with our body (or mind) and receive the proper care and advice in response.

Ideally, this should be a smooth and convenient process. Especially considering patients are, by definition, not in their best shape when they need to see a doctor.

In practice, a doctor's visit can be a complicated affair. Finding an appointment, driving to the doctor's office, getting delayed in the waiting room, etc…

I think everyone has been in a situation where he wished that a doctor could have come to him instead and received the luxury of a consultation at home. This is possible, but at a premium price that most people cannot afford.

The Rise of Telemedicine

The obvious reason why doctor home visits are expensive is that they waste a lot of the doctor's time in transit. A time that could be better used helping other patients. After all, a professional trained for almost a decade is not being productive when behind the wheel.

This was before everyone had a device that could communicate in real-time video. The rise of the smartphone builds the basic infrastructure for allowing a doctor to reach patients in their homes while still in the office.

Of course, the pandemic has been fueling this fire, with as few in-person interactions as possible. But the inherent advantage of telemedicine means it is here to stay:

• More convenient for the patient.
• The better possibility to digitalize medical profiles.
• Possibility to access more doctors if your regular one is unavailable.
  • Quicker access to care.
  • Easier to get a second opinion.
• Enhance possibilities for anonymized data collection to improve drug prescription, insurance policies, etc…

More Complicated Than It Looks

Of course, this is not that simple. The doctor needs to be able to keep confidential the interactions to comply with regulations. He also needs to be able to write the digital version of a paper prescription, add data to the patient's medical files, check insurance coverage, etc. He could do things easily in person but not so through a smartphone.

This is why telemedicine needed a new category of service provider, offering patients and doctors the necessary infrastructure & interface for online medical consultation as secure, efficient, and safe as one in-person.

A few companies have risen to the challenge and taken over this market, which is still in its infancy.

Top 5 Best Telemedicine Stocks

(stocks are sorted by market capitalization at the time of the writing of this article)

1. M3, Inc.

M3 is a Japanese company whose mission is “Making use of the Internet to increase, as much as possible, the number of people who can live longer and healthier lives, and to reduce, as much as possible, the amount of unnecessary medical costs.”

M3 is centered around telemedicine and the digital transformation of healthcare as a whole. Notably, its m3.com website claims 320,000 doctors registered. It provides a job board, medical news, telemedicine Q&A solution “AskDoctors,” and various medical information websites like QLife.

M3 is also a serial acquirer, using the purchase of foreign companies for its expansion abroad. In just the last two years, it acquired:

• Scribendi medical paper platform in Canada.
• MedPlanet market research services in France.
• Michael Allen Company is a pharma consulting firm in the USA.
• Remedium recruiting solution in the UK.
• Rinkai Medical Service is a health checkup provider in Japan.
• iDoctus telemedicine solution in Spain and Latin America.
• Pharma-insight market research in Germany
• MSRA clinical trial network in the USA.
• TheMedical Accounting and EHR Business from Canon Medical Systems
• Login Nursing care facilities SaaS in Japan.

The list could be a lot longer, but it represents a good snapshot of the extremely busy acquisition schedule for M3.

Overall, the company is shaping itself as an international giant in everything healthcare related, from market research, clinical trials, telemedicine, etc.

Lastly, the IPO of M3-backed MedLive (2192.HK) has added a massive cash injection into M3 in 2021.

Source: M3

A tailwind for the company is that Japan is a quickly aging society. So, the demand for medical care is rising quickly, with not enough professionals to provide it. Telemedicine can help increase the overall efficiency of the healthcare system and help handle this issue.

The company has been growing very quickly, both in revenue and net profits. It is an interesting play for investors looking for an aggressively growing company but already profitable and diversified over the whole spectrum of online healthcare and medical data.

2. Doximity, Inc.

The company claims, “Aside from the iPhone, there’s never been a piece of technology adopted by clinicians as quickly as Doximity, with 80% of U.S. doctors and 50% of all NPs and physician assistants as verified members”.

A key feature is how the patient can answer by clicking a message without downloading an app. It also provides a link with the patient without said patient having direct access to the personal cell phone of their doctor.

This is some impressive market penetration, with now the question being for the company to increase usage rate, monetization, and cross-selling opportunities.

Source: Doximity

The company notably extends beyond teleconsultations, with medical file transfer (replacing paper mail and fax), medical news, and even hiring. Another opportunity is the pharmaceutical marketing segment, now dominated by low-tech methods.

Source: Doximity

The company has experienced explosive growth, with revenues growing 48% CAGR and EBITDA growing 106% CAGR.

Source: Doximity

The company is profitable and trading a rather high multiple (higher than 60 P/E), reflecting the very high growth expectations for the stock. It will best fit patient investors counting on Doximity to maintain its leading position in telemedicine in the USA and potentially hope for expansion abroad.

3. Teladoc Health, Inc.

Teladoc was a market darling of the pandemic, notoriously backed by Ark Invest's Cathy Wood. While the stock price has since cooled down, the company has made some progress in improving revenues and profitability in 2022. Still, losses are large and cause concern.

Teladoc's strategy is to create a model of virtual primary care, in opposition to more conservative hybrid care models (mixing in-person and virtual consultations). The company expects this model to become the main medical care model over time, especially with the rise of monitoring connected devices. Teladoc also bought the chronic care management provider and device maker Livongo to support this strategy in 2020.

Source: TeladocThe company had in Q4 2022 $918M in cash. Net loss per share was $23.49, to be compared to a share price in the $22-$40 range in the last year at the time of this article's writing. The FY2023 forecast predicts a $1.75-$1.25 net loss per share, showing that Teladoc is getting closer to becoming profitable in the coming year.

This company is best suited for investors looking for a turnaround situation, for the stock to recover once profitability has been achieved.

4. American Well Corporation

Amwell's strategy is to create an offer combining in-person care and telemedicine as an automated care program. This includes online prescription, teleconsultation, insurance, etc…

Source: Amwell

It focuses on urgent care, women's health & pediatrics, and psychiatry.

This gives the company a diversified revenue mix, trending toward evolving into a more subscription-based, SaaS-like business model with recurring revenues.

Source: Amwell

The company has been growing its revenues quickly but is still far from being profitable.

It estimates it will need to double revenues to reach the scale it will break even. No date has been forecast for this, but this might take several years at the current revenue growth rate.

Source: Amwell

Source: Amwell

Amwell is somewhat of an underdog in the telemedicine segment compared to Teladoc and Doximity, and it shows in its market valuation. This by no means makes it automatically a losing proposition, as the sector is growing quickly and might accommodate many companies by the time it matures. So, it can find a place in the portfolio of investors looking for diversification and more widespread exposure to the sector.

5. UpHealth, Inc.

UpHealth is the result of the merger by mother company GigCapital of UpHealth and Cloudbreak Health, both digital healthcare companies, and listed separately under the ticker UPH. GigaCapital is a venture capital firm investing in telemedicine, electric vehicle fleets, automation, and online sales.

The central strategy of UpHealth is to develop its telemedicine service so that it is fully integrated with the pre-existing IT systems of the largest health institutions. It gathered a network of 30,000 service providers.

On one hand, this might be a good strategy, as hospitals will be very reluctant to change their IT procedures. On the other hand, this might stifle innovation and limit the potential of UpHelath products, tying them to legacy products.

With just more than $40.5M in revenue in Q4 2022 (up 20% year-to-year), UpHealth is on the smaller side of this industry.

Q4 2022 saw a net loss of -$27M, a serious improvement compared to -$336M in Q4 2021. Nevertheless, the last quarterly loss roughly equals the company's entire market capitalization. UpHealth also had to do a private placement to raise $4.5M in March 2023.

Due to its smaller size and limited cash availability, UpHealth is best for experienced investors, able to estimate the real risk level correctly and do a calculated risk on the company managing to survive without excessive dilution of existing shareholders.