This bear market has been tough on stocks in every industry -- even the safe haven of healthcare. Often, healthcare stocks outperform because investors know people can't avoid buying their medications or undergoing a medical procedure. That supports earnings of healthcare companies even during troubled times.
Today, though, many healthcare stocks are heading for an annual decline. Instead of avoiding these players, investors should give them a second look. Some of them may be ready to go parabolic once the general economic environment improves. Or even sooner. Let's check out three with huge potential.
1. Teladoc Health
Teladoc Health (TDOC -1.29%) is a leader in the telemedicine market. Shares soared during early pandemic days when people opted more for online medical visits than office visits.
This year, Teladoc shares have lost their shine. They've plummeted about 70%. That may look pretty intimidating. But it's important to understand why they've dropped -- and what may spur an eventual surge.
Teladoc disappointed investors when it reported two billion-dollar noncash goodwill impairment charges earlier in the year. That was linked to its purchase of Livongo, a specialist in the virtual management of chronic conditions. Investors also have worried that Teladoc isn't yet profitable.
Things are brightening, though. Teladoc didn't report additional impairment charges in its latest earnings report. Instead, it had some good news for investors. Its net loss narrowed year over year. And Teladoc continues to increase revenue and visits in the double digits.
The Livongo purchase may have hurt the company in the near term. But it could pay off over time. Chronic care is a key growth area for Teladoc. And signups for multiple chronic care programs are linked to member retention.
Today, Teladoc shares are trading at about 1.8 times sales. That's the lowest level ever by this measure. Considering Teladoc's growth right now and market leadership, this looks like a steal -- and a starting point for major gains.
2. CRISPR Therapeutics
CRISPR Therapeutics (CRSP -2.42%) isn't yet generating product revenue. But it may not be far away. The gene-editing specialist and partner Vertex Pharmaceuticals are submitting exa-cel, their candidate for blood disorders, to regulators as of this month.
They expect to complete submissions in the U.K. and Europe this year. And they plan to complete the U.S. submission in the first quarter of next year.
Exa-cel is a one-time curative treatment for beta thalassemia and sickle cell disease in adults. This could be big because right now treatment options are limited. And the idea that exa-cel is curative truly could spur demand from doctors and patients.
Exa-cel offers another positive for CRISPR. It shows that the company's gene-editing technique works. This may encourage more and more investors to take a second look at this innovative company.
And a second look indicates CRISPR is lining up other potential revenue drivers that could deliver in the not-too-distant future. CRISPR is studying exa-cel in phase 3 trials in pediatric patients. If all goes well, this could broaden the patient group -- and therefore increase the revenue opportunity. The company also is conducting a pivotal trial of CTX110, an immuno-oncology candidate. Additional data is expected this year.
CRISPR shares have dropped 34% this year. And they're trading near their lowest over a three-year period. At the same time, CRISPR is closer than ever to product revenue. So now looks like a buying opportunity -- and upcoming regulatory decisions could be major catalysts for the shares.
3. Intuitive Surgical
Intuitive Surgical (ISRG -0.20%) is the global leader in robotic surgery. The company has nearly 80% market share, according to BIS Research.
Intuitive over time has grown its base of installed surgical robots worldwide to more than 7,300 systems. And use of them generally has increased -- except during coronavirus disruptions. At certain points during the pandemic, hospitals have postponed surgeries. That results in lower revenue for Intuitive. That's because Intuitive generates revenue through the sales of instruments and accessories used during the procedures.
Still, overall, Intuitive's growth has continued. In the third quarter, worldwide procedures using its da Vinci system climbed 20%. And revenue advanced 11% to $1.56 billion.
There are two reasons to be positive about Intuitive maintaining its market share -- and therefore maintaining revenue growth. First, surgical robots cost millions of dollars. So it's unlikely hospitals will replace a system if they're happy with it. Second, most surgeons train on the da Vinci. That means they know the system well and probably would want to stick with it.
I also like the fact that Intuitive actually makes more revenue from selling instruments and accessories than from selling the robots themselves. This ensures recurrent income.
Intuitive shares today are trading at 51 times forward earnings estimates. That's down from more than 72 earlier in the year. This looks like a great entry point for a long-term investor. The stock has declined even as revenue has continued to rise. Intuitive clearly is set for a rebound -- and when this happens, it could be big.
