Missed the telehealth stock boom? There's still time to get in with these stocks, Jefferies says

Published Tue, Jun 30 20206:46 AM EDTUpdated Tue, Jun 30 20208:17 AM EDT

(This story is for CNBC Pro subscribers only.) Hot telehealth stocks like Teladoc that have outpaced the broader market amid stay-at-home orders have left some investors who missed the trade worried it's too late to invest in them. But Jefferies said a few technology-based health companies could offer investors a second chance at cashing in on the adoption of telehealth. "COVID has catalyzed telehealth broadly across many healthcare subsectors. We think providers' flip from reluctance to eagerness sparks biz model changes that are underappreciated," Jefferies analyst David Windley said in a note to clients. Shelter-at-home orders spurred telehealth use from patients and medical providers during the coronavirus pandemic. The Wall Street firm said consumer uptake of the service was inevitable over time but availability of these online services and awareness from consumers have been longstanding impediments. The virus outbreak pulled forward years of telehealth adoption curve, said Jefferies. "The willingness of providers to enter the telehealth fray en masse, their desire to retain patients and defend revenue, and patients' strong desire to see their own doctors introduces a marked shift toward a 'white label' revenue model that has been a secondary approach to this point," said Windley. Jefferies told clients that names like Teladoc and Cigna have the most to offer in the near and long term. Even having gained about 125% in 2020, Teladoc has room to run, Jefferies said. The firm expects Teladoc's revenue and profitability to benefit from the steep growth curve. "We think TDOC's service breadth and payer customer base makes it very well-positioned to succeed in the payer model that has predominated to date," said Windley. Cigna is another company Jefferies is bullish on given the boom in telehealth. Health-care providers like Cigna should benefit from a more efficient delivery system enabled by telehealth, the firm said. "While telehealth alone is not a reason to buy Cigna, we like Cigna over its Commercial competitors (UnitedHealth and Anthem) due to its lower exposure to Commercial Group Risk member attrition in this challenged employment environment," the analyst said. "Increased telehealth adoption should also translate to a shift in prescription fulfillment to non-physical pharmacy locations, which should benefit CI's Express Scripts business." Jefferies also likes National Vision as eye care centers start to reopen. "Post CV19, we are bullish on the prospects that EYE can recover the near 1.8M visits ($250M) of displaced volume during the 8-9 weeks when stores were closed; full recapture would imply 30% upside to 2H estimates," said Windley. Jefferies said telehealth will cause an increase in referral flow to providers which should benefit lab companies like Quest Diagnostics . The firm also said Exact Sciences ' new direct-to-consumer online ordering platform will emerge as a winner, giving it a channel to reach patients who don't need a physical physician office visit. CareDx launched a remote home-based blood draw and monitoring systems during the Covid-19 pandemic. Jefferies said it is continuously impressed by CareDx's ability to pivot to address social distancing restrictions. "From a patient perspective, we're not sure why anyone would prefer going back to transplant center," said Windley. Jefferies also liked Zimmer Biomet , Edwards Lifesciences , Alcon and Cooper Companies in the long term. — with reporting from CNBC's Michael Bloom.

Jason Gorevic, CEO, Teladoc

Scott Mlyn | CNBC

(This story is for CNBC Pro subscribers only.)

Hot telehealth stocks like Teladoc that have outpaced the broader market amid stay-at-home orders have left some investors who missed the trade worried it's too late to invest in them.

But Jefferies said a few technology-based health companies could offer investors a second chance at cashing in on the adoption of telehealth.

"COVID has catalyzed telehealth broadly across many healthcare subsectors. We think providers' flip from reluctance to eagerness sparks biz model changes that are underappreciated," Jefferies analyst David Windley said in a note to clients.

Shelter-at-home orders spurred telehealth use from patients and medical providers during the coronavirus pandemic. The Wall Street firm said consumer uptake of the service was inevitable over time but availability of these online services and awareness from consumers have been longstanding impediments. The virus outbreak pulled forward years of telehealth adoption curve, said Jefferies.