RBC shared its top 6 digital health picks for 2021 as Wall Street anticipates accelerated growth for the industry

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The digital health industry gained momentum in 2020 as the pandemic forced healthcare providers to shift to using online platforms.

That will continue into 2021, according to an RBC Capital Markets report published on January 6, which recommended six digital health stocks to buy.

RBC analyst Sean Dodge also predicts accelerated venture funding and more companies going public, after the digital health space raised $14.1 billion in venture funding in 2020, according to Rock Health, and nine companies made their public-market debuts. 

Read more: The 8 digital health startups to watch that are changing healthcare in 2021

Though the pandemic may have prevented some major hospital systems from making big investments on new digital health platforms in 2020, Dodge predicts that it will not significantly impact IT spending in 2021.

With the pandemic, both healthcare providers and consumers have grown comfortable with online-based healthcare options. Private insurers and programs like Medicare and Medicaid have increased reimbursement, and tech investors have taken notice. 

The pandemic era has seen nearly doubled valuation of digital health companies. The report attributes this partially to “tech-like” attributes of these companies: large addressable markets, steep trajectories in revenue growth, and product scalability. 

Given how the market performed in 2020 and 2019, RBC’s report recommended three digital health stocks to buy, as well as an additional three favorites.

Top 3 digital health companies investors should buy, per RBC

Teladoc (TDOC): RBC predicts Teladoc’s growth will outpace the broader telehealth market. Although more consumers may return to seeing providers once the worst of the pandemic subsides, Teladoc will likely buck the trend. Teladoc grew its visits in the third quarter of 2020, which is traditionally slow, and increased digital traffic by RBC’s definition in the fourth quarter, suggesting that Teladoc’s business will continues to be strong. RBC gives Teladoc a $260 price target for 2021. That’s a 30% increase over its price on January 5.

Tabula Rasa Healthcare (THRC): Tabula Rasa is a leading provider in the PACE market, a Medicare and Medicaid program that provides care for patients at homes or in their communities. It offers a comprehensive product aiming to improve prescription drug safety that RBC believes will sustain 20% revenue growth over the next few years. RBC gives Tabula Rasa a $54 price target for 2021. Compared to its price on January 5, That’s a 23% increase over its January 5 price. 

Sotera Health (SHC): Sotera provides sterilization and lab testing services for pharmaceutical and medical device companies. Although not the fastest growing company analyzed in its report, RBC recommends buying Sotera for its consistency, ability to expand its profit margins, and lack of direct competition. RBC gives Sotera a $31 price target for 2021. Compared to its price on January 5, this represents a 17% increase. 

3 other digital health and healthcare IT stocks to consider buying in 2021

Ontrak (OTRK): Ontrak works with insurance companies to identify and treat members with co-occurring chronic health and mental health conditions, including substance abuse issues, who are expensive to provide coverage for. Ontrak laid out a …read more

Source:: Business Insider


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