The pandemic gave a boost to a trend that was already growing -- telehealth. Before the pandemic, telehealth was often seen by companies as a convenient option to save money on insurance costs, but during the pandemic, it became a necessity. Going forward, consumers, having seen how easy telehealth services can be for prescription refills, mental wellness, and other areas, are going to expect telehealth options.
One report by Fatpos Global puts the compound annual growth rate (CAGR) for telehealth at 37.8% from 2021 to 2030, growing from a market of $37.69 billion in 2020 to $930.31 billion by 2030. Three telehealth stocks that will benefit from the trend this year and beyond are Humana (HUM -3.66%), Doximity (DOCS -2.73%), and CVS Health (CVS -1.07%).
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Humana is keeping telehealth as part of its overall focus
Humana stock is down slightly for the year, a little more than 1%. However, over the past five years, it has delivered a total return of more than 136%. It is known more for being an insurance company, but it has become heavily invested in telehealth.
The company has a solid balance sheet. Through six months of 2021, the company reported revenue of $41.3 billion, up 8.6% year over year. Earnings per share through six months were listed at $14.56, down from $17.97 in the same period last year. But the company's guidance said it expected yearly EPS to be $24.97 to $25.47, compared to $25.31 last year.
Humana has been involved in several telehealth initiatives in the past two years, and in its first-quarter earnings call, CEO Bruce D. Broussard said the company sees digital health initiatives as a commodity. Instead of developing its own initiatives, he said it made more sense for Humana to often partner with another company.
In 2019, it began a seven-year deal with Doctor on Demand to establish On Hand, an online medical platform for Humana users. Last year, Humana made a $100 million investment in telehealth start-up, Heal, which focuses on home-based healthcare but also offers telemedicine, telepsychology, and digital monitoring health services. In February 2021, Humana teamed with Mercy to offer virtual care services for Humana's Medicare Advantage members. In June, it signed an agreement with League to extend that company's digital health and benefits platform to Humana Employer Group and specialty insurance members.
Doximity works the other side of telemedicine
Doximity may be the best telehealth stock you've never heard of -- unless you work in the medical field. It is a leading digital platform for medical professionals, and it claims more members than the American Medical Association. According to Doximity, it serves more than 80% of physicians in the U.S. as well as 50% of nurse practitioners, physicians assistants, and pharmacists.
The company has been a big part of telehealth services; its paid Doximity Dialer cloud-based platform grew by 24,000 physician licenses in the quarter, with 300,000 unique virtual visits in the quarter by physicians, nurse practitioners, and physician assistants, the company said in its first-quarter earnings call.
Doximity, founded in 2010, has seen its stock rise more than 45% since its initial public offering on June 24. In its 2022 first-quarter report, the company said it had revenue of $72.7 million versus $36.4 million in 2021, an increase of 100% year over year. It had net income of $26.3 million compared to $1.5 million in the same period last year. It also said it expected yearly revenue of $296.5 million to $299.5 million, compared to the $206.9 million it reported in fiscal 2021.
Think of Doximity as LinkedIn (which is owned by Microsoft) for medical professionals -- that's apt because Konstantin Guericke, the co-founder of LinkedIn, was an early member of Doximity's Advisory Board. Doximity allows medical students and health professionals to sign up for free with its revenue coming from subscription-based add-on services and mainly from advertising revenue. Pharmaceutical and hospital companies are willing to pay dearly for direct access to Doximity's subscribers.
According to Doximity CEO Jeff Tangney, the healthcare industry in the U.S. spent only 28% of its advertising dollars on digital efforts compared to the 63% spent on digital advertising by other industries. I like Doximity because it already controls such a dominant first-to-market share of the industry and has plenty of room to grow revenue streams.
CVS Health is growing virtually and in person
CVS stock is up more than 25% this year, and over the past five years has seen an 87% increase in cash flows from operations. CVS is better known for its pharmacies than as a telehealth provider, but it is a big player in the field, especially since its acquisition of Aetna in 2018.
The company offers video doctor's visits through its MinuteClinics in 35 states and the District of Columbia. It also has a network of telemedicine providers that provide services in D.C. and every state except for Idaho. The company also encourages online pharmaceutical orders. More importantly, unlike a pure-play telehealth company such as Teladoc Health, CVS has been profitable for a long time. In the second quarter, the company reported six-month revenue of $141.7 billion, up 7.3% year over year. It also reported net income through six months of $5 billion, up from $4.9 billion in the same period last year.
CVS has increased revenue for the past 10 consecutive years and boosted EPS in nine of the past 10 years. Based on its full-year forecast of $280.7 billion to $285.2 billion in revenue and $6.35 to $6.45 in EPS, it will likely increase both again this year. History alone is by no means a guarantee of future success, but in addition to the business's rosy outlook, CVS looks like a solid long-term pick.
