When the pandemic began last year, many investors started paying much closer attention to the healthcare sector, whose stocks generally outperformed the broader market, especially those directly involved in the pandemic--from vaccines and vaccine rollouts to hospital equipment.
About $8.3 trillion is spent on healthcare globally, and a huge portion of that is spent in the United States where healthcare spending reached $3.8 trillion, accounting for about 18% of the entire nation’s economy.
It is estimated that by 2028, U.S. healthcare spending will reach $6.2 trillion and account for almost 20% of the GDP.
With that sector snapshot in might, here are 3 healthcare stocks that look great in this market:
#1 Teladoc (NYSE:TDOC)
Teladoc is down year-to-date, but we think it has a lot of room to grow in the megatrending atmosphere of soaring telemedicine.
The pandemic has increased adoption of virtual healthcare, and Teladoc is certainly a global leader in this area.
McKinsey & Company projects that the U.S. virtual care market could steal up to $250 billion in healthcare market share, and Teladoc is expected to assume a rather large portion of that.
Even though the company’s growth has slowed compared to 2020, the trend going forward is clearly virtual from all angles. No president has ever been able to fix the broken American healthcare system and make it more affordable, and none likely will. The only way to minimize costs is by shifting much of it to “virtual”.
While we expect even more going forward, Teladoc’s Q3 financials saw the company grow revenue by 81% year-over-year to $522 million. The company had 3.9 million total visits, a 37% increase compared to the same period last year.
In August, Teladoc signed new agreements with CVS Health and Centene to provide Teladoc Health’s Primary 360, a service that stands to be one of the bigger growth drivers starting in 2022. This adds to Teladoc’s acquisition of Livongo Health in 2020, which gave it a digital health platform to help people manage chronic conditions.
#2 CVS Health Corp (NYSE:CVS)
CVS Health also beat expectations for third-quarter earnings and raised its outlook for the year. The company reported Q3 revenue of $73.8 billion, up 10% y-o-y, and beating analyst estimates by a cool $3.8 billion.
Over the last month CVS stock has gained 11%, now trading at around $92 per share. On Wednesday, Citigroup raised its price target on CVS from $98.00 to $111.00.
The company reported third-quarter net income of $1.59 billion, or $1.20 per share, down from $1.22 billion from last year’s third quarter. Yes, that Q3 growth mostly came from prescriptions and COVID-19 vaccines, there are other drivers coming up.
CVS is in the process of redesigning thousands of its stores to make room for clinical services
Its insurance subsidiary Aetna also rolled out a virtual primary care plan earlier this year.
#3 Cue Health (NASDAQ:HLTH)
Before the Covid-19 pandemic, Cue Health was mostly a revenue miss, and nothing to write home about. The pandemic changed everything, with 2020 bringing major growth to this company, which ended up launching its IPO in September.
It hasn’t disappointed.
In June 2020, Cue Health was awarded emergency use authorization from the FDA for Covid-19 tests. That was its first new lease on life.
Then, earlier this year, it started cooperating with National Basketball Association (NBA) Mayo Clinic, Google, and most recently, it signed a nearly half-billion deal with the Department of Defense.
Things are looking great. The only real question here is whether Cue can survive without COVID-19 testing. Does it have any other tricks up its sleeve to ensure future growth? Yes. Maybe.
Next week, Cue is scheduled to launch its direct-to-consumer (DTC) virtual health platform and will offer its members on-demand access to board certified physicians and e-prescription services. It’s got a lot of competition in that space, so investors will be looking to see how much the COVID-19 testing wins it market share for other virtual services.