Telehealth: Buy the Dip

Telehealth is here to stay and stocks like WELL Health Technologies (TSX:WELL) are starting to look attractive.

| More on:
calculate and analyze stock

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

With the health crisis receding, investors seem to have lost their appetite for telehealth stocks. Some of the biggest players in this industry have lost nearly half their value in recent months. Canada’s telehealth stocks have held up slightly better, but are still trading below their all-time-highs. 

If this dip is worth buying into or is the telehealth industry a losing play as the economy reopens? Here’s a closer look. 

Telehealth is here to stay

It’s worth noting that there was a surge in the number of virtual clinic appointments booked last year. However, physical clinics were not shut during the lockdown. People could visit their family doctor and get the medical attention they needed throughout the pandemic. However, many chose to visit virtually. This is because a video call with a doctor is clearly more convenient. 

Convenience is what makes these services sticky and is probably why the industry has plenty of runway ahead, despite the concerns of investors. The ongoing dip potentially creates an opportunity. 

Telehealth stocks

WELL Health Technologies (TSX:WELL) is still the market leader in Canada. The stock is trading 17% lower than its all-time-high, but its underlying fundamentals remain as strong as ever. The company is expanding its footprint in the U.S. this year and is on track to exceed its $300 annual revenue run rate. Meanwhile, its market value is just four times higher at $1.25 billion. 

The WELL health team clearly believes the stock is undervalued, which is why they’ve initiated a Normal Course Issuer Bid (NCIB) to buy back shares. 

CloudMD Software & Services Ltd. (TSXV:DOC) is another one of the telehealth stocks that has felt the full force of the broader tech sell-off. After a 200% rally in 2020, the stock is down by about 30% year to date. Amid the recent pullback, there is no disputing that the company has a solid growth path going by its acquisitions over the past year.

CloudMD has carved a niche for itself as a leading provider of cloud-based software for medical practitioners. The company offers telehealth services, an employer healthcare platform, and a mental health solution. Its telehealth solutions are currently being used by over 500 clinics and 4,000 licensed practitioners.

With the world unlikely to revert to the traditional methods of seeing healthcare providers in person, CloudMD remains well-positioned to see strong demand for its telehealth solution. After acquiring company after company last year, the company now has a solid growth path with revenue expected to surge with this strategy.

CloudMD Prospects

Aggressive acquisition strategies mean CloudMD can now operate as a telehealth provider in several industries. Its annualized run rate has already crossed the $60 million mark. Meanwhile, the team is actively diversifying its revenue streams which is another green flag for investors. 

That being said, the recent pullback means the stock is fairly valued. The stock is trading at just abopve seven times annualized revenue. The company is expected to deliver superior returns over the long run, given the favorable industry trends supported by an aggressive acquisition strategy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani owns shares of WELL Health Technologies.

More on Tech Stocks

A stock price graph showing growth over time
Tech Stocks

3 Cheap Growth Stocks to Buy Right Now

Given their growth prospects and cheaper valuations, these three TSX stocks could deliver superior returns in the long run.

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

3 Stocks I’m Buying During a Tech Stock Correction

Tech stocks like Constellation Software (TSX:CSU) should be on your radar.

Read more »

financial freedom sign
Tech Stocks

$5,000 Invested in These 3 Stocks Could Make You Rich Over the Next 20 Years

Are you looking for stocks that could carry your portfolio over the next 20 years? Here are three top picks!

Read more »

potted green plant grows up in arrow shape
Tech Stocks

This Growth Stock Rallied 20% Yesterday, But it’s Still Cheap!

This growth stock is a great value. The 20% rally indicates the company has executed well and has potential for…

Read more »

Target. Stand out from the crowd
Tech Stocks

Down 70%, This Could Be the Best Stock-Split Stock in Canada to Buy and Hold Forever

This is arguably be the best stock-split stock to buy right now, as it has the potential to multiply your…

Read more »

Growth from coins
Dividend Stocks

What’s More Effective: 1 Growth Stock or 1 Dividend Stock for High Returns?

Let's settle the age old debate. If you had invested in a huge growth stock or a solid dividend stock,…

Read more »

Money growing in soil , Business success concept.
Tech Stocks

Forget BlackBerry Stock: Buy This Growth Stock Instead

BlackBerry (TSX:BB)(NYSE:BB) stock is up over 30% in the last two months, but is it all due to meme stock…

Read more »

Plant growing through of trunk of tree stump
Tech Stocks

Buy the Dip: 2 Top Growth Stocks That Could Turn $5,000 Into $25,000

Investors can consider buying growth stocks such as Shopify that are trading at a discount to their historical valuation.

Read more »