The healthcare spend in the U.S. was roughly $3.8 trillion in 2020, with costs exceeding those of many other developed countries, particularly for drugs and procedures. The onset of COVID-19 also exposed many failings and accelerated the shift towards digital care. We examine three healthcare stocks to buy right now.
Hims & Hers
Hims & Hers Health (NYSE: HIMS) provides telehealth services and sells over the counter, prescription drugs, and personal care products online. The company went public through a $1.6 billion SPAC merger in 2021 and has been highly volatile since going public.
Hims & Hers currently specializes in several areas such as hair loss, sexual health, anxiety and depression, and dermatology. It believes that these represent a total addressable market today in the region of $65 billion. If Hims & Hers can capture a small portion of this, it leaves a long runway for growth, notwithstanding future opportunities in other areas.
The company’s mission is “to eliminate stigmas and make it easier for people to access care and treatment for the conditions that impact their daily lives”. Hims & Hers is primarily targeting millennials with its native digital platform, with this cohort accounting for the majority of its customers on its platform. It believes that as this group ages, the company will too, and adapt to the ever-growing needs. Its high net promoter score (NPS) of 65 demonstrates that its customers like the product.
The company continues to execute and reported revenue growth of 69% year-over-year (YoY) with expanding gross margins of 78% and no debt as of Q2 2021. The majority of its revenue is subscription-based, growing by 76% YoY to 453,000 customers.
However, the company is operating at a loss which expanded to $9.2 million in Q2. The company faces fierce competition from other telehealth providers such as Teladoc, Amwell, and others, along with traditional pharmacies.
GoodRx Holdings (NASDAQ: GDRX) is an American company that enables its customers “to get the healthcare they need at an affordable price,” solving the problem of 30% of prescriptions going unfilled due to cost.
GoodRx has been the most downloaded medical app for several years on the Apple App Store and Google Play Store. The platform enables customers to find coupons and discounts on drugs to save money. It primarily makes money through a flat 15% paid by the pharmacy benefit manager to GoodRx. It also generates revenue through subscriptions, telehealth, and selling ads to pharmaceutical companies. The company is growing rapidly, and in Q2 2021, revenue grew by 43% YoY to $176.6 million with a net income of $31.3 million, a 14% increase YoY.
GoodRx benefits its customers with an average saving of 79% off prescription medication, leading to a high repeat activity on the platform of 80%. The company is also liked by its six million customers and physicians with extremely impressive NPS of 90 and 86, respectively.
GoodRx faces competition from other companies, including tech giant Amazon, branching into healthcare and even releasing a Prime Rx discount card. GoodRx also has little to no ability to expand its core product internationally, limiting growth opportunities.
Veeva Systems (NYSE: VEEV) operates cloud-based software for the life sciences industry that complies with industry-specific compliance and regulations that was founded by former Salesforce employee Peter Gassner in 2013.
In Q2 2021, revenue increased by 29% YoY to $456 million, with subscription revenue accounting for roughly 78% of this, creating a highly predictable revenue stream. Its net income also increased by 16% and reached $108.9 million in the quarter. Veeva also previously stated that it plans to reach $3 billion in revenue by 2025, more than double that of fiscal 2021.
The company continues to attract customers and has over 1,100, including high-profile customers such as Pfizer, AstraZeneca, Eli Lilly. Veeva also has impressive net retention rates, which were 124% in fiscal 2021.
Veeva has also continued to expand outside the life sciences industry, commanding a significant portion of its total addressable market. It has launched new products such as MyVeeva for Patients that enable remote connection for clinical trials.
The company is trading at a valuation of 28x price to sales which is not cheap. Furthermore, its new offerings are key as it hits market saturation and may not move the needle sufficiently to continue to deliver growth and hit its forecasts.
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Contributing Writer at MyWallSt
Colm's favorite stock is Virgin Galactic as it is representative of his visions for our world in the future.