Should You Buy These Health Care Stocks After Its Recent Dips?
In the stock market today, investors appear to be cautious toward health care stocks as the COVID-19 vaccine roll-out gathers steam. While the pandemic has without a doubt place an enormous strain on the global health care system, the companies that can adapt quickly are poised to benefit. At such a time of crisis, flexible adaptation is critical. We can see such an example in the case of fierce rivals Johnson & Johnson (NYSE: JNJ) and Merck & Co (NYSE: MRK) collaborating to make JNJ’s COVID-19 vaccine.
During these challenging times, effective innovation is crucial and these 2 health care stocks are taking big steps in that direction. As more people are staying at home, medical needs will need to be dispensed virtually. There’s a great chance you might have heard about telehealth, even though you may not have used it. Telemedicine is certainly advantageous now amidst a highly transmissive COVID-19 virus where physical interaction is riskier than ever. Teladoc Health (NYSE: TDOC) is one of the medical companies that offer comprehensive virtual care.
On the flip side, Clover Health Investments Corporation (NASDAQ: CLOV) is well known for its Medicare Advantage insurance plans with a wide range of access to health care networks. This is made possible using its proprietary software to connect patient’s data to physicians to design the optimal insurance plan. Both companies are hot names to consider when it comes to innovation in the health care industry. However, the big question here is, which health care stock is the better buy amid a general market pullback?
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Teladoc Health Inc. (TDOC)
When talking about the advancement of technology in the health care sector, Teladoc is a name that often comes to mind. This comes as no surprise seeing that the company’s plethora of telehealth services remain vital services during the pandemic. This makes Teladoc Health one of the biggest winners during the coronavirus pandemic.
With the news of COVID-19 vaccines’ roll-out ramping up, it is not surprising why TDOC stock has been under pressure. That’s because many are concerned that the demand for telemedicine will decline once we achieve a certain level of ‘normalcy. Investors need to keep in mind that vaccines can only help to prevent infection, but it is not clear at this stage that it could stop the virus from spreading.
We may not be entirely out of the woods just yet. For these reasons, telemedicine is likely still relevant in the near term. And who knows, once consumers develop the habit of using telemedicine, it could stick around for a long time to come.
Strategic Acquisitions Make TDOC Stock A Buy For The Long Term
Teladoc has acquired Livongo Health Inc. (NASDAQ: LVGO), creating one of the largest health care providers. The combined entity also contributed to the doubling of sales to $1.1 billion from $553 million in 2019. Investors are worried that over the long term, people will go back to visit their doctors in person, and that’s expected. However, the strategic acquisition of InTouch Health allows Teladoc to take advantage of the former’s existing hospital networks. Expanding its reach and potentially creating more opportunities, would allow Teladoc to keep its sales growth level to a healthy level.
Some say that the pandemic promoted the telemedicine business mostly because of necessity. But telemedicine will not simply become irrelevant just because physical doctor visits are becoming safer. Efficiency, convenience, and cost-effectiveness are strong driving factors for growth in any industry and telemedicine have all that. Let’s not forget about 5G networks that will definitely boost the efficiency and speed of telemedicine communications. Some analysts believe that while Teladoc’s 2021 growth may not be as impressive as 2020, it will still be pretty respectable. With all that in mind, will you be betting on Teladoc stock?
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Clover Health Investments Corporation (CLOV)
Clover Health combines advanced technology with traditional programs to deliver the best possible outcome. The company went public in January through a merger with Social Capital Hedosophia III, a special purpose acquisition company (SPAC) with former Facebook (NASDAQ: FB) executive, Chamath Palihapitiya as CEO.
And things haven’t been going well, with CLOV stock losing nearly half of its market cap this year alone. Using its proprietary technology, Clover Assistant collects the patient’s data and shares it with the physician to design the optimal Medicare Advantage plan with the right cost.
Through its platform, the company empowers physicians with data-driven, personalized insights at the point of care. All in all, this serves to improve clinical decision-making and outcomes. Understandably, as Clover’s services optimize existing health care systems at affordable prices, investors are keeping an eye on CLOV stock. Despite the bearishness from a short-seller report that criticized the company’s business model, investors also have to note that the company is growing at a high rate.
Could CLOV Stock Replicate Its Strong 2020 Growth In 2021?
On March 1, the medical insurer released its year-end results for the past year. Sales came in 45.5% higher year-over-year to $672.9 million in 2020. The company also achieved similar growth numbers in the fourth quarter ended December 31. Clover Health said that the number of its members managed by physicians who use the Clover Assistant totaled 32,400. That represented a year-over-year increase of 43%.
The company may have yet to achieve profitability. But its top-line growth is certainly a strong sign that the company is on track to profitability. It is worth pointing out that net loss has declined from $363.7 million in 2019 to $91.6 million in 2020. It certainly doesn’t appear as if the company is burning cash to grow its business.
By and large, both health care companies certainly have their own plus points in their respective fields. While CLOV stock may currently be under pressure, it does have great potential for growth once the company is out of hot water. Health care insurance will always be relevant. And Clover Health is essentially bringing new technology to improve upon an old industry to improve affordability for consumers. If you think Clover Health has what it takes to change the game, then CLOV stock can be a good fit.
If you are optimistic about the future of telemedicine, then TDOC stock would be suitable for your portfolio. After all, the pandemic has introduced the convenience of telemedicine to more users. Many could see it as a viable alternative to traditional doctor visits. The fact that more players are getting into telemedicine is a validation of the market potential here. Teladoc’s strategic maneuvers in the past years have cemented its position as a leader in its space. Therefore, it seems to me that TDOC stock has the edge here in terms of growth runway.