These three digital health companies are all buys

It’s a still-emerging space that got a huge boost from COVID-19 and the stay-at-home economy, and for investors looking to find investment-ready companies in the telehealth and digital health space there’s a short but growing list of options. As a primer, here are three names that should be on your radar.

Starting with the big daddy in telemedicine, there’s Teladoc Health (Teladoc Health Stock Quote, Charts, News, Financials, Analysts NYSE:TDOC), which was a huge success in 2020 but has fared less well this year.

Teladoc, which provides telehealth services to connect physicians and healthcare workers with patients mostly in the US, saw its business spike in the early days of the pandemic. The company registered a 203 per cent growth in total visits over its platform for the second quarter 2020, pushing revenue to US$241.0 million, an 85 per cent year-over-year increase.

But even with the re-opening of economies, TDOC is still doing bang-up business, as witnessed in this year’s second quarter, which registered more than a double on revenue from Q2 2020. Teladoc’s topline was US$503 million, while total patient visits grew 28 per cent year-over-year to over 3.5 million.

That kind of growth led management to up its full-year 2021 guidance, now calling for revenue of between US$2 and US$2.025 billion.

“We have solid momentum heading into the second half as the market embraces the unified care experience that only Teladoc Health has the breadth and scale to achieve,” said CEO Jason Gorevic in a July 27 press release.

Even with the stock in the red for 2021, Teladoc’s continued growth should be cancelling out the naysayers, according to portfolio manager Kim Bolton, who recently spoke on the company.

“[The stock] is volatile and probably the main reason is that this is one of those companies that has yet to be profitable,” Bolton said in a segment on BNN Bloomberg. “The stock price has skyrocketed and it has made a number of acquisitions. It just completed earlier this year a merger with Livongo Health.”

“We still like it,” he said.

Bolton gave a one-year price target of US$166.85 per share, which would represent a projected return of 11 per cent.

For some Canadian content, investors have Vancouver-based WELL Health Technologies (WELL Health Stock Quote, Charts, News, Analysts, Financials TSX:WELL). This stock has put up huge gains in recent years including a more than 4x return in 2020. For 2021, WELL is currently at even par, but the company is still in its expansion stages, growing its stable of healthcare clinics, its Electronic Medical Records business and its telemedicine operations in Canada and the US.

Echelon Capital Markets analyst Rob Goff recently delivered a report on WELL, saying the company’s M&A record has been stellar, including the major acquisition of gastroenterology company CRH Medical, completed earlier this year.

“WELL Health has moved aggressively in building its product and technology suite. The Company’s OSCAR network and owned clinics represent an efficient distribution network to layer on products/services and accretive acquisitions,” said Goff in an August 13 update to clients.

“Our bullish view is clearly founded on a positive review of its acquisitions, taken both individually and collectively. We find the inclusion of acquisition earnouts as a clear indication of seller confidence and disciplined structuring by WELL to ensure alignment while protecting downside,” Goff said.

With his report, Goff reiterated his “Speculative Buy” rating for WELL while raising his target from $12.00 to $13.00, which at press time represented a projected return of 62.3 per cent. (All figures in Canadian dollars except where noted otherwise.)

Finally, we have Toronto-based integrated healthcare tech company Think Research (Think Research Stock Quote, Charts, News, Analysts, Financials TSXV:THNK). Think focuses on clinical standardization across the continuum of care where its cloud-based platform helps organize medical knowledge and patient date for physicians and healthcare workers. The company also has broadened its offerings to include services like telemedicine, EMR and virtual pharmacy and currently serves over 300,000 healthcare professionals worldwide and over 2,800 hospitals clinics and long-term care facilities.

Think Research recently received a coverage initiation from Desjardins, where analyst David Newman started the company off with a “Buy” rating and $5.00 target price, which at press time represented a projected return of 135 per cent.

Newman said among Think’s pluses are the company’s vertically integrated model to cover a patient’s journey across the healthcare setting as well as its global presence and strong relationships with enterprise businesses and government. 

On acquisitions, Newman said, “THNK continues to fill in white space along the knowledge lifecycle, driven by acquisitions, e.g., the recent BioPharma acquisition which established its Clinical Research business. We believe THNK has >20 companies in the pipeline across its four segments and all key geographies (>$200 million in aggregate revenue).”

Year-to-date, Think Research’s share price is currently down about 46 per cent.

Disclaimer: Nick Waddell and Jayson MacLean own shares of WELL Health and WELL is an annual sponsor of Cantech Letter.