HIMS vs. Teladoc: Which Digital Health Stock Is a Better buy?

Author: Finscreener

Estimated read time: 3 minutes

Publication date: 18th Oct 2021 12:20 GMT+1

The coronavirus pandemic has increased the demand for virtual and healthcare manifold times and, as a result, the telehealth industry has suddenly become a crowded space. This industry is expected to have tremendous long-term prospects. As demand rises, healthcare spending of people in the US is expected to rise to $6.2 trillion by 2028. Therefore, companies that are in a competitive position have a better chance to deliver market-beating gains for patient investors.  

Teladoc Health Inc. (NYSE: TDOC) and Hims & Hers Health Inc. (NYSE: HIMS) are two interesting stocks in the telehealth space. While Teladoc is an established player in this crowded industry, HIMS is a relatively newly listed competitor. 


Teladoc Health Inc

Teladoc offers a personalized and digital-first approach to medicine for patients located in the U.S. and abroad. During the pandemic, the shares of this company saw gigantic growth but started falling as soon as the economy started to reopen. Its shares have plunged by more than 50% from the $292-high achieved earlier this year. 

However, despite the fall in stock value and slower membership growth, Teladoc continues to deliver strong growth in multiple areas. This strong core performance has pushed up its revenue per member per month in the second quarter by 142% year over year and 10.3% sequentially. Moreover, the utilization rate for the company's telehealth platform has also jumped to 21.5% in the second quarter from 16% in the prior-year period and 19.6% in the previous quarter.

Further, with the acquisition of Livongo, the company’s future prospects have gotten brighter as there are tremendous opportunities for Teladoc to cross-sell between its telehealth customers and Livongo's client base. At present, Teladoc’s management expects that their number of closing deals will have a more significant impact in 2022 than in the current year and that would help the company to grow top-line at a compound annual growth rate of 38% over the next few years.


Hims & Hers Health Inc

Hims & Hers Health Inc. Is an American telehealth company that is on a mission to make healthcare systems more accessible to people. It offers free as well as low-cost telehealth services directly to consumers and also delivers prescriptions and supplements to the patient's door itself. The company has been strategically targeting millennials as it believes they are the future of digital healthcare and it intends to grow as per their evolving needs.  

HIMS is still in the early growth stage period and has solid potential. In the first quarter of this year, the company reported a 75% year-over-year growth in sales, and in the second quarter, its sales grew by an impressive 69% beating the analysts' expectations by a large margin. 

These promising numbers have in turn also upgraded the company’s expected revenue for the whole year from between $221 million - $227 million to between $251 - $255 million. Moreover, the company has also made a couple of acquisitions like the purchase of teledermatology company Apostrophe which might boost the company’s performance significantly.


The bottom-line

Both Teladoc and HIMS offer compelling growth opportunities and it is very difficult to comprehend which one of them is the winner in all scenarios. Teladoc might be a better buy for most investors in general as it is a market leader with a full suite of products, and is presently down significantly from its all-time highs. HIMS, on the other hand, is still in its early growth stage and faces an uphill battle in the highly competitive telehealth market. As a result, it involves a little more risk than Teladoc and won’t fit into the risk appetite of risk-averse investors.

Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.