‘Netflix moment’ should benefit Canadian healthcare tech stock CloudMD Software & Services Inc. (TSXV:DOC)
Capital Ideas Media | September 4, 2020 | SmallCapPower: Citi analyst Daniel Grosslight wrote recently that he believes the healthcare technology sector is on the verge of its ‘Netflix moment’, saying pain points have boiled over (accelerated by COVID-19) combined with an underinvestment in legacy technology.
(Originally published on Capital Ideas Media on July 21, 2020)
[Editor’s Note: Shares of CloudMD have soared 188% since Capital Ideas wrote about the company about six weeks ago.]
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“Fundamentally, we believe that high healthcare costs are a function of systemic waste, both clinical and administrative, which consumes nearly US$935 Billion of resources annually. While no panacea, the smart application of technology (paired with the human touch) can solve many of the pain points in the healthcare system,” he said.
Mr. Grosslight predicts that U.S. healthcare spending will increase at a 5.4% annual compound rate to 20% of GDP by 2028, providing a “strong tailwind” for technology companies that can make this spending more efficient.
One small Canadian company that went public in June of this year, which is poised to benefit from this trend, is CloudMD Software & Services Inc. (TSXV:DOC).
[Note: Our favourite Canadian stock in this space continues to be WELL Health Technologies Corp. (TSX:WELL)]
CloudMD offers software as a service (SAAS) based health technology solutions to medical clinics across Canada, through the combination of connected primary care clinics, telemedicine, and artificial intelligence (AI).
The Company currently provides service to a combined ecosystem of 376 clinics, more than 3000 licensed practitioners, and almost three million patient charts across its servers.
Industrial Alliance Securities analyst Rob Goff initiated coverage of the Vancouver-based company recently with a “Speculative Buy” rating and a target price of $1.40 per share (suggesting more than 100% upside from current levels).
He said CloudMD has built an integrated healthcare platform on a modest capital outlay that brings “patient showcase capabilities and a significant competitive advantage in its low-cost B2B and B2C distribution capabilities.”
Mr. Goff sees Amazon.com’s moves toward the healthcare market “as endorsement for the sector’s demographic growth prospects, a threat to legacy models, and a catalyst to consolidate the ecosystem towards larger, vertically-integrated providers.”
“These considerations support our bullish thesis towards CloudMD’s integrated healthcare platform development. Marquee partnerships with IBM along with the Jim Pattison Group attest to management’s strength while contributing towards the development of differentiated technology and distribution capabilities,” he wrote.
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