The coronavirus is putting healthcare stocks in the spotlight. One of the issues the virus is bringing to light is the importance of data. However one of the major problems in the healthcare sector is how to collect and efficiently use data. The health care sector looks to be a logical application for artificial intelligence (AI) and big data. However, there are legitimate privacy concerns about the use of this data.
One concern is how healthcare data can be used in predictive analysis. In an email to InvestorPlace, Joel Shapiro professor at Kellogg School of Management at Northwestern University, said “it is unclear how having access to a deep level of data would influence behavior. If I learn that I have a 5% chance of getting the flu in the next 2 weeks, then what would I do differently?” Shapiro notes giving consumers access to better data only makes sense if it leads to better outcomes.
But having consumers embracing technology is an important first step. And in that regard, says Kevin Schulman, MD, professor of medicine and, by courtesy, of economics at Stanford Graduate School of Business, “I think this (the coronavirus pandemic) could be a PR turning point.”
“If consumers and the public get used to these commercial tools and understand the benefits we might see a shift from bricks and mortar business in health care to virtual ones,” said Schulman.
Morgan Stanley estimates this segment of the healthcare market will grow to $10 billion by 2024 at a compound annual growth rate (CAGR) of 40%. Many of the companies that form the tip of the spear are not publicly traded at this time. However, here are three healthcare stocks that can allow you to get in on this emerging trend.
Healthcare Stocks for AI and Big Data: Health Catalyst (HCAT)
Remember when electronic records were going to be the end of the doctor-patient relationship? The reality is that the demand for digital records has disrupted few industries as much as the healthcare industry. And Health Catalyst (NASDAQ:HCAT) stands out in the growing, competitive field of Healthcare Information Technology (HIT). Grand View Research predicts that the digital healthcare market will grow to $509.2 billion by 2025 at a CAGR of 27%.
One of the most pressing concerns for the healthcare industry is the ability to lower costs through increased efficiency. And one of the largest areas of waste is in the area of data collection. Health Catalyst provides an enterprise AI solution that gathers different, and in many cases, archaic data collections then converts them into a “big data” set in their cloud-based Data Operating System (DOS) for the purpose of using machine learning to make sense of the data.
Since transitioning to a subscription contracting model in 2016, Health Catalyst has built a solid base of 90% recurring revenue and has never lost an all-access customer.
Teladoc Health (TDOC)
Teladoc Health (NYSE:TDOC) has been one of the most referenced stocks during the coronavirus-imposed social distancing taking place throughout the world. The company is not profitable, but the recent crisis is opening the door. The Trump administration has authorized an expansion of services like the kind provided by Teladoc and other companies.
The principle behind Teladoc is simple enough. Doctors and patients can connect in a digital setting. The patient doesn’t have to leave their home. And if the patient is ill, there’s no risk of spreading a virus in a doctor’s office. The state of Washington is even moving to allow doctors to treat patients voluntarily even if they are not licensed in the state (they must be licensed elsewhere).
Currently 260 doctors have volunteered. However, this stock is far from a sure thing. The vetting process will take months. And then getting licensed can is still a lengthy, and expensive, venture. But as of March 20, TDOC stock was up 70% year to date.
Globus Medical (GMED)
One of the ways AI is being used is in the area of robotic surgery. That, and an increased understanding of spinal health, are two reasons to look at Globus Medical (NYSE:GMED). The company is on the forefront of robotic-assisted, minimally invasive spinal procedures.
However, the company is expecting to lose some sales as many patients opt to postpone elective procedures in the wake of the coronavirus outbreak. But any investment in healthcare technology is a long-term play, and GMED is no different.
The stock is down nearly 30% since reaching its all-time high in December 2019. However, as of this writing, it looks like GMED is finding support around $40. If that holds, the stock could have a significant upside. Analysts are giving the stock a price target of $61.
Ryan Zimmerman of the firm BTIG cites GMED’s strong balance sheet that includes $721 million in cash, no debt and recent board approval for a share buyback of $200 million which should cushion the company through the current market turbulence.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
