With COVID-19 highlighting the many weaknesses of our current healthcare systems, the digital healthcare industry is growing. With several disruptor companies on the scene, we decided to look at Doximity (NYSE: DOCS) and Teladoc (NYSE: TDOC). But, which is the better investment?
Doximity: the bull and bear case
Doximity is a leading digital platform for medical professionals to connect, liaise on cases, and coordinate patient care. It currently has over 1.8 million medical professionals using its service and in the U.S. 80% of all physicians use the platform.
Doximity is a free service, so its revenue comes from advertisements which it offers out on a subscription basis to pharmaceutical companies and other healthcare systems. This choice of advertisement is beneficial for all parties involved and it is rather lucrative too. For the fiscal year ending March 2021, Doximity’s revenue came in at $208.9 million, up 78% year-over-year. Surprisingly for a newly public company that is growing fast, the company is also profitable with a net income of $50.2 million.
Doximity’s growth is likely to continue as the growing addressable market is around $18.5 billion. The company also has plans in the pipeline to target other medical professional sectors, such as nurses, dentists, and psychiatrists. Indeed, its new telehealth services, which were introduced in 2020, would benefit all medical professionals, not just Doctors
However, Doximity will have to battle against the likes of Microsoft-owned LinkedIn and other companies like Google who provide professional networking services. These companies are large and have been known to outgun any smaller company that attempts to take market share from their profitable services.
Additionally, 12% of Doximities revenue came from one client, meaning that it could be subject to volatility if it does not diversify its list of clients over the next few years.
Teladoc: the bull and bear case
Now that Doximity is branching out into telehealth, Teladoc is currently its biggest competitor in this space. Teladoc is a multi-national virtual healthcare company that provides its users with digital doctor appointments and repeat prescription orders. For this reason, it became a COVID-19 stock with its share price rising just under 140% throughout 2020. Although this year has seen it lose 50% of its value since its peak in February, the stock is still up 74% since before the start of the pandemic.
In its most recent report, Teladoc saw its revenue increase 109% YoY to $503 million with an Adjusted EBITDA of $66.8 million, up 154% YoY. Teladoc estimates that the telehealth industry will experience a compound annual growth rate of 38% over the next 5 years. This alongside its merger with Livongo and its slurry of new deals with other companies will ensure that Teladoc can continue to grow alongside the telehealth space.
Teladoc estimates that this sector will continue to accelerate at a compound annual growth rate of 38% in the next five years. There is also further opportunity outside its core offering with its Livongo merger, which increased its total addressable market to $121 billion.
The shift to digital methods of healthcare has been accelerated by the pandemic with 3.5 million extra visits to telehealth services last year. Despite this, digital health is not always going to be the option that people want when talking to a healthcare professional. However, by merging with Livongo, its telehealth services will include a full suite of new offerings to encourage people to stick with virtual appointments, including a mental health service called MyStrength.
Unfortunately, Teladoc, like Doximity, is in a space where competition is rife. Amwell, One Medical, Doximity, and even the like of Amazon are filling up this industry with alternative and varied offerings.
Furthermore, the company is not profitable, its net loss came in at $133 million. Although this has been narrowing for the last three quarters, Teladoc will need to prove that they can cut down on costs and become more efficient if they want to show sustainable growth in the long term.
So, which is a better investment?
Teladoc is a healthcare disruptor and its current trajectory will see it grow into a powerhouse in the industry. Doximity is a bit more niche, but this has not stopped it from becoming a valuable and highly regarded service for medical professionals. If it can show that its new telehealth service can compete with the likes of Amwell and Teladoc, then this company will be one to watch over the next few years as it expands to other sectors within the medical professional world.
If the telehealth scene doesn’t tickle your fancy, MyWallSt’s got a shortlist of market-beating stocks in this industry and many others. Get on the path to financial freedom by starting your free access now.
Financial Writer at MyWallSt
Poppy’s favorite stock is Nvidia as she loves innovation and this stock has bags of it. Nvidia invented the GPU in 1999 and even today its immersive graphics give life to the gaming world. Poppy is also inspired by Nvidia’s ability to imagine and create positive change for the world, with its AI technology fuelling new developments in the automotive industry, the medical industry, as well as powering data centers around the world.