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2 Healthcare Stocks You Should Buy, According to Wall Street

By Rachel Warren - Sep 4, 2020 at 9:11AM

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These two businesses have outperformed the S&P 500 all year.

It hasn't necessarily been easy to find winning stocks this year. The effects of the COVID-19 pandemic have shaken several companies to their core, and some simply aren't surviving the long-term economic implications of extended lockdowns. 

On the flip side, some winners have risen to the top of the pile. Although the healthcare sector has been less embattled during the coronavirus pandemic than other industries, stocks in this arena certainly haven't been immune to its economic pitfalls. 

When analysts set their sights on a winning healthcare stock, it's usually worth taking a second look. These are two top healthcare stocks you should buy, according to Wall Street.

Photo of New York Stock Exchange on Wall Street.

Image source: Getty Images.

Teladoc 

It was already the biggest and oldest telehealth entity in the country before the pandemic, and Teladoc Health's (TDOC 6.13%) revenue has soared to new heights this year. Growth was impressive in 2019, with a 32% year-over-year revenue increase to $553 million and a 57% increase in visits on its platform.

But 2020 so far is blowing all that away, with a 92% increase in visits during the first three months of the year and a 203% year-over-year escalation of patient visits during the second quarter. Between the beginning of January and the end of June, Teladoc attained 63% revenue growth and surpassed total earnings of more than $421 million for 2020's first half. The company expects to boost its domestic paid membership base to as many as 51 million individuals during the third quarter and projects up to $995 million in revenue for all of 2020.

Teladoc was already a superior growth stock before the pandemic, but now there's no telling how far the company could expand. Its recent decision to acquire Livongo (LVGO) and create a telehealth mega-giant is expected to bring the new company pro forma revenue growth of 85% for 2020.

TDOC Chart

TDOC data by YCharts.

Dexcom 

Shares of diabetes-care company Dexcom (DXCM 1.80%) are up 147% from just 12 months ago. DexCom's position in the continuous glucose monitoring (CGM) market, a sector expected to achieve a compound annual growth rate (CAGR) of 22% between 2019 and 2027, has helped it stay the distance throughout the pandemic.

In July, the company's G6 continuous glucose-monitoring system received a temporary authorization from Health Canada for use by pregnant women with diabetes. In May, Health Canada had already temporarily authorized the device for expanded use in hospitals to help providers evaluate very sick patients while limiting face-to-face contact. The company has also proffered its CGM systems for U.S. medical providers. 

Dexcom's revenue shot up by 44% year over year in the first quarter of 2020, with 39% domestic earnings growth and 61% growth in other markets. Investors knew the true test of Dexcom's mettle would be in its Q2 earnings, which it released July 28, and they weren't disappointed. During the second quarter, revenue was up 34% year over year -- 21% outside the U.S. and 38% domestically. The company is anticipating its 2020 earnings to jump by 25% to $1.9 billion for the whole year.

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Livongo Health Inc and Teladoc Health. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.

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Stocks Mentioned

DexCom, Inc. Stock Quote
DexCom, Inc.
DXCM
$89.83 (1.80%) $1.59
Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
TDOC
$40.32 (6.13%) $2.33
Livongo Health, Inc. Stock Quote
Livongo Health, Inc.
LVGO

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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