The Corona Virus pandemic has changed the life we used to live. Things are not similar anymore. Several industries and companies have been drastically impacted. Companies and industries have been trying to cope up with various business models to sustain in this economy. Industries like Airlines, Restaurant, and hotels industry have suffered the most due to new norms of living of social distancing and cross-country restrictions. But the industry which is under huge pressure to serve under these new-normal conditions is Healthcare. This industry has gone through a lot of changes. US Healthcare system has acquired new ways to treat patients with proper medical facilities. At the beginning of this pandemic, the US Healthcare system was at its break, we even saw new headline Hospitals shutting their doors as they were unable to treat the huge number of patient footfalls in hospitals and other small clinics. Doctors are finding new alternatives to treat their patients. People are still falling sick not only due to Covid-19 but also due to various other diseases or injuries. Doctors are now broadly using Telehealth care/ Telemedicine services to treat their patients. This term can be defined as “Use of electronic communications and software to monitor and treat patients without patient’s visit”.
According to IBIS World research suggested that the Telehealth services had grown 34.7% annually from the period of 2014-2019. The market size in 2019 was $45B and it is projected to grow by $175B by 2026. Despite an increase in revenue in this segment Americans were not quite using the service until the novel coronavirus pandemic hit in early 2020. But now doctors suggest more patients visit the telehealth care services more, for example, if 20 patients are visiting the clinic, 50-60 patients are taking the telehealth care service. So, we see a major change in consumer mindset where social distancing is a new norm of our normal life. Patients are more willing to opt for the telehealth service and Hospitals and Healthcare companies are adopting this service which is making changes in their way of treating and monitoring the patients and ensuring the safety measures.
US Government is also encouraging the service as in March it decided that users can opt for this service without any extra cost and private health insurers also have to settle in full. This gives a boost to this industry as well. Major tech companies are partnering with various healthcare companies to provide necessary services to both users and companies eventually boosting this industry. There are various companies which can get benefited from all these factors, this is a major shift in the Healthcare industry, and companies benefitting the most are Teladoc (NYSE: TDOC); American Well (Amwell) Healthcare company.
Teladoc Healthcare, Inc
Teladoc Health, Inc. provides virtual healthcare services on a business-to-business basis in the United States and internationally. It covers various clinical conditions, including non-critical, episodic care, chronic, and complicated cases like cancer and congestive heart failure, as well as offers telehealth solutions, expert medical services, behavioral health solutions, guidance and support, and platform and program services. The company’s platform enables patients and providers to have an integrated smart user experience through mobile, Web, and phone-based accessed points. The company revenue has grown quite significantly over the past few years, which is shown below:
Though the company is still not making its profits yet there is huge potential to grow, seeing the revenue growth. The company’s EBDITA has also improved form ($62,848) in 2016 to ($35,490) in 2019, we could see the company reporting its profit by end of the year 2021. We are expecting the company to perform well given the current situation and the change in our mindsets. We except the stock to perform well as soon the company starts making profits, so we may see a huge upside rally. An investor can buy this stock for the long term with Buy and Hold strategy. [Credit Suisse has given a good rating in its reports Top Ten Companies to invest in 2020].
American Well (AMWELL) Healthcare
Similar to Teladoc, Amwell is also is into telehealth services. It is a privately held telemedicine company based in Boston. The company operates in all 50 U.S. states and works with 55 health plans, which support over 36,000 employers and collectively represent more than 80 million covered lives. Amwell raised $500M till now and is planning to raise $560M through IPO. According to S-1 filing with the SEC (Securities and Exchange Commission), the company aims to sell 35 million shares with a price band of $14-$16 per share which will bring gross proceeds of $490-$560M. In the first half of 2019, Amwell’s revenue was $69 million, and that jumped 77% to $122 million in the first half of 2020. Though the company is in a loss like Teladoc we expect IPO could also have a major listing gain and investors can hold the stock for the long-term.