Securities.io is not an investment adviser, and this does not constitute investment advice, financial advice, or trading advice. Securities.io does not recommend that any security should be bought, sold, or held by you. Conduct your own due diligence and consult a financial adviser before making any investment decisions.
Healthcare In Your Pocket
The miniaturization and decline in prices of electronics have already given us GPS navigation, smartphones, and omnipresent connectivity. One sector that has been lagging a little behind is health.
It is becoming increasingly clear to both patients and doctors that more health data is required to deliver the best healthcare. One of the easiest ways is through wearable devices, monitoring health parameters continuously daily.
These devices can be either dedicated to health monitoring or perform these functions on top of others, like smartwatches. They can record daily movements, blood pressure, pulse rates, sleep monitoring, oxygen levels, etc. Other devices can also monitor more medical data for specific conditions, such as blood sugar.
Most wearable companies are not solely active in healthcare wearables but also manufacture other types of electronic devices.
The industry is currently dominated by a few giant tech companies. While they have massive resources and capabilities, health monitoring is often a small afterthought for these companies.
In the background, a few other specialized manufacturers are also trying to show that focus and dedication to their client's needs can overcome the scattershot approach of tech giants.
The market for wearable medical devices is expected to grow by 13.67% CAGR until 2027.
Best Wearable Health Tracking Stocks
1. Apple Inc.
Apple is best known for its iPhone smartphone series, as well as computers, laptops, tablets, and other consumer electronic products. It is also a leader in wearables, especially smartwatches.
The health App coming with the Apple Watch can monitor your sleep, record medications, record movements and activity, measure hearing, heart health, mental health, and more.
Apple is also selling the Withings smart thermometer, which is able to connect to health apps and record all temperatures measured on the device. Apple also offers Fitness+, providing support to stay fit and practice a healthy level of physical activity.
Apple's main strength in this market is its well-known capacity for seamless integration with other Apple devices. This reinforces its ecosystem and gives its smartwatches extra capacities that a stand-alone product can struggle to replicate.
Apple Watch is currently holding almost 1/3rd of the smartwatches market. This gives Apple a good chance to stay a leading brand in the health monitoring sector and gives it access to millions or even billions of people's health data.
Another smartphone giant, Google (now Alphabet), is aggressively expanding in the health & fitness wearable markets through its Android operating system. The largest move in the segment was the 2021 acquisition of market pioneer FitBit.
Google is a very rich and powerful company. It has also struggled to venture out of its main niche of search engine and smartphone OS. Concerns about privacy and its handling of private data are also recurrent with the company.
So it may not be a complete surprise that the acquisition of FitBit and Google getting access to the users' data has generated mixed reactions and even multiple inquiries by official institutions like the European Union. Some users also claim that FitBit products suffered from Google interference, including the removal of apps, connectivity to third parties, and the general openness that had made FitBit popular in the first place.
Nevertheless, FitBit is a very popular product. It is estimated to sell more than 18 million devices in 2022, and in 2020, it has already reached the impressive milestone of 17.72% of adult Internet users in the US using Fitbit.
Google's holding company, Alphabet, is also active in other health fronts. It notably owns Verily, a leader in “precision health.” The company has, for now, been loss-making and seems to be looking to cut costs. Still, Alphabet's growing knowledge and experience in health data from Verily could translate into radical innovation for its wearables, something any other manufacturers would have to partner with a biotech or healthcare company to achieve.
Samsung's wearable and health offerings closely mimic the ones of Apple with its Galaxy Watch series. It similarly covers heart rate, sleep, activity, etc…
While lagging behind Apple, Samsung is no pushover, having ranked 2nd for 3rd in smartwatch sales in most quarters in the last years.
Once again, similarly to Apple, the company has many activities, of which smartwatches are just one among many, with bendable smartphones the latest innovation from the Korean firm and ranking #1 in global smartphone shipments by volume.
Samsung is very concerned about its strategy for wearables to turn smartwatches into “a personalized, holistic health experience.” This includes nurturing better lifestyle habits around sleep and exercise, going beyond just monitoring health data.
Philips is a well-known small electronics consumer brand (shavers, electric toothbrushes), equally active in healthcare. It was the #1 for MedTech patent filing in Europe for 2022.
It is active in connected medical products, from wearables to imaging, respirators, or medical robots. The company is also active in semiconductors (including maglev technology) and high-tech/robotics/automation.
Philips' wearables offer covers cardiac, respiratory, and activity metrics. Its sensors can be integrated into smartwatches, health monitors, medical patches, and activity trackers.
Regarding wearables, Philips favors a partnership solution, where it develops for third parties “their” connected IoT (Internet of Things) medical devices fully compatible with the rest of Philips' solutions. In that context, it offers its clients prototyping, regulatory advising, end-to-end product development, and industrial-scale production.
The company wants to create a fully integrated digital healthcare environment, where sensors match devices, and then use multiple connectivity solutions to integrate into the Philips HealthSuite Cloud solution and allow for in-depth data analytics.
In Q2 2023, Philips has been growing sales by 9% year-to-year, for a total of $4.5B, and 1.82 billion people were directly affected by Philips' products.
Being often a MedTech industry supplier, Philips is not as visible in the sector as other more prominent companies. It is nevertheless an expert in building high-performance electronic devices and sensors, often pushing forward what's possible in its niche in healthcare and wearables.
With wearables increasingly integrated into healthcare and part of medical protocols, we can expect the Healthcare segment of Philips to be a growing part of the conglomerate.
5. Garmin Ltd.
Garmin is a leader in outdoor electronics, with an initial offering of GPS and navigation tools (automobile, marine, and planes), now expanded to fitness and health monitoring.
Fitness represents 23% of the company's revenues and 10% of operating income, mostly driven by smartwatches.
It has shipped 15 million devices in 2022, for a total of $4.86B in revenues.
Investors will be interested to know the company is debt-free, generated an operating income of $1.03B, and paid $679M in dividends in 2022.
Garmin might not be a tech giant, but it is razor-focused on the outdoor & fitness target, making half of its income beside navigation. This sector is also the main growth area for the company, with the segment most likely to become the main revenue source in the future.
The reputation of Garmin for sturdy, high-quality, and useful outdoor products converts well into the fitness and health segment. Interestingly, it leads in the premium segment, with the greatest market share in the >$500 price range, beating Apple here despite it usually dominating the high-price segment of its markets of smartphones, computers, and tablets.
So Garmin might be confined to the niche market of fitness and sports “fanatics,” ready to pay more for the highest quality and a dedicated brand. This, nevertheless, can be a very profitable activity and might help investing in Garmin to pay off for its shareholders.
6. DexCom, Inc.
While health monitoring is often synonymous with smartwatches, such devices cannot yet handle some health data and conditions. One such case is diabetes. This is a quickly growing health condition driven by the rise in obesity and sedentary lifestyles. Just between 2019 and 2021, global expenditure for diabetes grew from $760B to $966B.
The company is growing quickly, having doubled its sales force in 2021, and is expanding internationally by gaining reimbursement in new countries a mix of resellers globally, and direct entry into strategic markets.
When it comes to serious and life-threatening conditions, the barriers to entry for wearables can be considerable. Regulatory requirements are much higher, more medical expertise is needed, and patients usually rely on their doctors' opinions, whose trust can be hard to win. The need for reimbursement by public or private insurance is also another issue.
This creates a strong niche for specialized companies like DexCom, which can leverage its expertise and network to dominate its home market of diabetes monitoring. So, while holistic health monitoring from a smartwatch or smartphone might be the future, there is a long time until this vision becomes true, and companies like DexCom are more likely than not to be profitable in the meantime. And eventually to be a prime target for merger or acquisition by more generalist wearable device companies.
Omron is a Japanese company active in the sensors sector in multiple industries, from healthcare to industrial automation, energy, and infrastructure. Healthcare is the company's second-largest segment, with $37.7M in revenues in Q1 2023 compared to a total of $184M. The segment grew 16.9% year-to-year, far quicker than any other company.
In the healthcare segment, Omron is the #1 brand recommended by cardiologists in the EU for home blood pressure monitors. The company sells blood monitors, EKGs, thermometers, nebulizers, scales, and electric pain relievers in the healthcare segment.
Its product, HeartGuide, is also the first wearable smartwatch to monitor blood pressure while also monitoring sleep patterns and tracking fitness.
Similarly to DexCom, patients suffering from a heart condition will want a dedicated product to monitor their health, ideally one recommended to them by their cardiologists.
Healthcare is a growing business for Omron, with its lead in blood pressure measurement likely to be possible to expand to other cardiology applications. Overall, Omron can capitalize on its technical know-how from industrial applications and expand it into healthcare, giving the company a new space for continuous growth.
Masimo is a health-tracking company with products in the hospital and at home. This includes 200 million patients a year around the world monitored by Masimo SET pulse oximetry, by far the main driver of the company's revenue for now.
It is also present in the home audio market, with smart speakers and HiFi systems.
Its healthcare offer is rather large, including a $499 health tracking watch, advanced baby monitor “Stork” (in the shape of a baby shoe), oximeter, wearable thermometer, or drug-free opioid withdrawal devices, as well as a large range of hospital health monitors.
The company sees its opportunity to bring home a hospital-level quality of health monitoring, as illustrated by its baby monitor checking on pulse and oximetry. In most of its product verticals, Masimo sees a 20% long-term annual growth opportunity.
The very strong presence of Masimo in the hospital gives it the network and reputation to keep expanding its offer into home-based products.
The company stock price had increased massively during the pandemic before crashing like many other healthcare stocks. This can represent an opportunity for investors willing to see the potential of a large consumer health brand instead of a niche, hospital-based oxymeters company in Masimo.
iRhythm is a health monitoring company focusing on heart monitoring, especially ECG.
The company has grown rapidly, with revenues growing >30% CAGR in the last 5 years. It serves 1.5 million patients globally, representing 28% of the core U.S. ambulatory cardiac monitoring market.
This 6 million people market is only part of the company target, with another 26 million people that could be potential users of iRythm, possibly poorly diagnosed or undiagnosed, with further expansion possible in the field of sleep heart failure, apnea, hypertension, and international markets. International markets would represent an immediate TAM (Total Addressable Market) in ECG of 5+ million people in specific prioritized markets, as much as the current US market.
iRhythm did a limited launch of its Zio Monitor in 2023, a wearable biosensor and digital platform that is 72% smaller and 62% lighter, greatly increasing the patient's comfort. The initial sales performance has been strong, and a US commercial launch is expected by the end of 2023.
The company is also currently evaluating the potential of a smartwatch offering and is planning to launch clinical studies in 2024.
iRhythm has grown to become dominant in its ECG monitoring field through superior technology and design, including in user interface. It has a large space to keep growing this market through international expansion and deepening its US market penetration. It can also expand its TAM by targeting patients not yet diagnosed but suspected of cardiac arrhythmia.
Altogether, this makes iRhythm a growth company in the health wearable industry, focusing on expansion over immediate profitability.
10. Biotricity, Inc.
Biotricity's product line is focused on real-time recording of cardiac data. This includes ECG and home monitoring, a remote patient consultation platform , and cardiac disease management software. Each of those has a massive TAM, with more than $43B in total.
Biotricity is still a very recent company, early in the commercialization of its product. So far, it has managed to incorporate 2198 physicians in its network, with a customer retention rate of 98% and multiple innovation awards.
Biotricity is remarkably ambitious, looking to build a cardiac monitoring wearable company and a full clinical ecosystem integrating the collected data into a software solution. By doing so, it would help physicians and nurses deliver better healthcare, including through telemedicine.
This makes it a startup stock, and investors in Biotricity will want to closely monitor the company's momentum, burn rate, and cash available.
In Q2 2023, the company had grown revenues by 50% year-to-year, to $3M, but also registered a net loss greater than its revenues. It will likely need fresh cash in this phase of quick growth, so shareholders should expect some level of dilution moving forward.