Telemedicine gained prominence during the pandemic's height. Two companies benefiting from the increased adoption of the technology are Teladoc Health (TDOC 0.78%) and Doximity (DOCS 2.80%). However, there are some important differences between these two corporations. The latter isn't exactly a pure-play telehealth company. Doximity is an online networking platform for medical professionals that provides telemedicine services, among others.
Still, Teladoc and Doximity should benefit from the increased adoption of telehealth in the coming years, so they might be decent stocks to consider for investors looking to cash in on it, too. But which one is the better buy?
NYSE: TDOC
Key Data Points
The case for Teladoc
There is much to like about Teladoc's business. The company is a leader in telehealth and facilitates millions of telemedicine visits every month. In the first quarter, Teladoc's total visits came in at 4.9 million, 8% higher than the year-ago period. The company's integrated care unit, where it offers a range of generalist and specialist virtual medical care, ended the period with 84.9 million paying U.S. members, an increase of 7% year over year.
Elsewhere, Teladoc's direct-to-consumer mental health platform, BetterHelp, has been making tremendous progress. In Q1, it had 467,000 paying members, jumping 22% compared to the prior-year quarter. Teladoc's BetterHelp is an excellent example of why the company's business looks promising. By providing mental health services virtually, the company removes some of the overhead costs associated with on-site mental health sessions and can offer its customers cheaper prices.
Offering people critical medical services at a lower cost is a significant selling point that should keep Teladoc's business and top line moving in the right direction. The company's revenue in Q1 increased by 11% year over year to $629.2 million. Teladoc isn't profitable yet. In the period, its net loss of $69.2 million was much better than the loss of $6.7 billion recorded in Q1 2022.
But there are good reasons to be confident that Teladoc will turn a profit soon. The company generally records excellent gross margins.
TDOC Gross Profit Margin (Quarterly) data by YCharts
Much of its expenses are currently going into marketing and advertising, which is understandable as it is still in growth mode. Once Teladoc becomes better established and its customer acquisition costs decrease, the company should be able to turn a profit. Overall, Teladoc looks like one of the best telemedicine companies to bet on for the future.
NYSE: DOCS
Key Data Points
The case for Doximity
As previously noted, Doximity is a platform for medical professionals to access all kinds of resources to help advance their careers and better serve their patients. It allows physicians to check up on the latest research in their field, communicate with other specialists, look for new job opportunities, conduct telemedicine calls with their patients, and more.
Doximity's platform arguably benefits from the network effect, whereby the more medical professionals join the platform, the more attractive it becomes to all players involved. This includes other physicians, as well as pharmaceutical companies and health systems that use Doximity to advertise their products and post job opportunities.
More than 80% of U.S. physicians and more than 90% of graduating medical students are signed up to the platform. The top 20 pharmaceutical companies by revenue, along with the 20 largest hospitals and health systems, all use Doximity. These are clear signs that the company's platform is incredibly valuable.
During Doximity's latest earnings period -- the fourth quarter of its fiscal year 2023, ending on March 31 -- the company's revenue increased by 18% year over year to $111 million. Doximity is profitable, and its net income for the quarter came in at $30.7 million, although that was a decline from the net income of $36.7 million reported in the year-ago period. Doximity also boasts excellent gross margins.
DOCS Gross Profit Margin (Quarterly) data by YCharts
Doximity still sees massive opportunities ahead. The company estimates a total addressable market of $18.5 billion, of which it has captured only a minuscule portion. Doximity's opportunities, competitive edge in the form of the network effect, excellent margins, and green on the bottom line make it an outstanding stock to buy.
The verdict
It's worth noting that both Teladoc and Doximity have seen their top-line growth rates decline in the past two years.
TDOC Revenue (Quarterly YoY Growth) data by YCharts
That's understandable, given that the early days of the pandemic brought them substantially more business. Still, Doximity is growing faster, with much juicier gross margins, and is already profitable. One could explain Doximity's higher revenue growth by the fact that it generates overall lower sales, but in my view, the green on the bottom line and better margins tip the scales in Doximity's favor. Still, both of these companies are worth investing in for patient investors.
