Investors in digital health stocks need to embrace their inner REO Speedwagon and keep "Ridin’ the Storm Out,” according to a report from analysts at Canaccord Genuity (TSX:CF, LSE:CF).
In a note named for the 1973 track, the analysts admitted that markets may still be heading for a recession despite major gains in January. The note cited Canaccord market strategist Tony Dwyer, who recently wrote that it is exceptionally rare for a recession to occur after the S&P bottoms out.
“We will bask in the rays of sunlight created by the recent rally but acknowledge that economic storm clouds (and market volatility) could emerge at any moment,” analysts said.
READ: Cloud DX expands contracts with two existing clients after its digital health platform Connected Health boosts remote patient monitoring programs
For tech-enabled healthcare companies, 2022 wasn’t so bad compared to other sectors, the firm pointed out. That demand strength could be here to stay, analysts argued.
“Considering our digital and tech-enabled health coverage universe play an integral role in addressing financial and operational challenges while increasingly delivering a definitive ROI, purchasing trends have held up despite the economic uncertainty. We suspect that demand strength can continue,” analysts said.
Technology also plays a crucial role in alleviating the pain points of the healthcare system.
“The financial outlook for providers, health systems and physicians is not expected to get meaningfully better without the help of technology or outsourced services,” analysts said. “... Managed care continue to seek to engage members and better manage high-cost conditions to control medical cost ratio. Therefore, given these financial and operational headwinds in the end markets our covered companies sell into, we are optimistic that the demand for technology and services to mitigate these challenges could remain solid.”
Canaccord’s report highlighted NYSE and Nasdaq-traded companies, but there are a number of small-cap companies in the digital health sector as well.
Ontario-based Cloud DX (TSX-V:CDX, OTCQB:CDXFF) has built a “Connected Health” platform that is used by healthcare enterprises and care teams across North America to virtually manage chronic disease and enable aging in place.
Minnesota-based Predictive Oncology Inc. (NASDAQ:POAI) is focused on applying artificial intelligence to develop optimal cancer therapies, which can ultimately lead to more effective treatments and improved patient outcomes.
Vancouver-based Empower Clinics Inc. (CSE:EPW, OTCQB:EPWCF) is an integrated healthcare company with multidisciplinary clinics, an at-home medical testing device company and state-of-the-art medical diagnostics laboratories.
And that’s just to name a few. A recession could be on the way, but as the Canaccord analysts (and REO Speedwagon before them) put it, markets are all about ridin’ the storm out.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel