The telehealth sector experienced significant growth during the initial phases of the pandemic, proving crucial for patients seeking convenient remote care. Contrary to concerns about a decline post-pandemic, telehealth remains a robust and enduring industry, offering substantial growth prospects in the healthcare landscape.
According to analysts at Grand View Research, the global telehealth market has already reached $100 billion, with projections anticipating its value to surpass $455 billion by the end of the decade. This substantial growth potential underscores telehealth as a compelling investment opportunity within the healthcare sector.
Two standout telehealth stocks poised for significant appreciation, capitalizing on current favorable valuations, are Teladoc Health (NYSE: TDOC) and Hims & Hers Health (NYSE: HIMS). The following insights delve into why these stocks represent compelling long-term investment choices.
1. Teladoc Health
Teladoc Health underwent rapid expansion during the peak of the pandemic when widespread stay-at-home orders were in effect. Although its growth rate has moderated, the company continues to exhibit positive revenue trends, with consistent single-digit increases. Notably, Teladoc’s revenue trajectory is upward, reaching over $2.6 billion by the close of 2023—an 8% YoY surge. This figure reflects a doubling of its $1.1 billion revenue in 2020.
While Teladoc has not yet achieved profitability, it has made significant strides in reducing losses. In 2023, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 33% to $328.1 million, constituting over 12.6% of its revenue.
Although some growth investors might find Teladoc’s expansion rate relatively moderate, its strength lies in consistently improving key financial metrics, with over 18 million virtual visits conducted last year. Positioned as a leading telehealth solutions provider, Teladoc remains an excellent investment choice to capitalize on the industry’s sustained growth.
Trading near its 52-week low, the stock offers an appealing opportunity, particularly as it is priced close to book value. With a modest price-to-sales multiple of just under 1, attributed to its relatively low market capitalization of $2.5 billion, Teladoc emerges as an undervalued asset. Investors inclined to buy and hold can potentially secure excellent returns from this healthcare stock.
2. Hims & Hers Health
In the realm of telehealth, Hims & Hers Health has emerged as a compelling investment, experiencing a remarkable 65% surge this year as investors respond positively to its recent performance. With a market capitalization slightly exceeding $3 billion, there is still considerable room for the business to amplify its value.
Distinguishing itself by providing convenient online access to prescription and over-the-counter medications, Hims & Hers addresses sensitive healthcare areas such as hair loss and erectile dysfunction. The company has expanded its offerings with the introduction of a virtual weight-loss program, strategically tapping into the growing popularity of Ozempic and other glucagon-like peptide 1 (GLP-1) drugs.
Positioned at an earlier stage in its growth trajectory compared to Teladoc, Hims & Hers benefits from the ability to deliver impressive top-line increases. Notably, its revenue for the previous year reached $872 million, marking an outstanding 65% YoY growth. Although the company reported a loss of $23.5 million, its adjusted EBITDA transitioned from a $15.8 million loss in 2022 to a positive $49.5 million.
Crucially, Hims & Hers concluded the year with 1.5 million subscribers, indicating a noteworthy 48% YoY increase. Subscribers play a pivotal role in the business model as they generate recurring orders, reflecting the ongoing expansion of the company.
While Hims & Hers stock is priced at more than 8 times book value, potentially diminishing its affordability compared to Teladoc, its dynamic growth trajectory and the prospect of significant future expansion position it as an exceptional stock to consider for investors looking to capitalize on the current market landscape.
