We recently published a list of the 10 Best Performing Healthcare Stocks So Far in 2025. In this article, we are going to take a look at where Teladoc Health, Inc. (NYSE:TDOC) stands against other best performing healthcare stocks so far in 2025.
The Healthcare Sector and its Dynamics in the Stock Market
Despite the ongoing craze surrounding the GLP-1 obesity drugs, the healthcare sector was a lagger last year. On January 3, Jared Holz, Mizuho Securities America’s healthcare sector strategist, appeared on CNBC’s ‘Squawk on the Street’ to talk about the healthcare sector’s outlook in 2025. While he anticipates another year of underperformance for the sector, he also believes that healthcare has “been so bad, maybe it’s gonna be good” in 2025.
Holz further said that the healthcare sector presents a calamity since there aren’t a lot of easy spaces in the domain. Other industry verticals, such as technology and financials, are well set up. Healthcare, in contrast, appears to have several variables in place, and most of them are not positive. However, he believed that the MedTech sector provides a sort of safety net in such a tumultuous sector. We talked about the medical device sector and the future of the healthcare industry in the US in a recently published article on 10 Best Medical Device Stocks To Buy According to Hedge Funds. Here is an excerpt from the article:
“According to McKinsey, the healthcare industry is expected to continually undergo a shift in growth dynamics. Health services and technology (HST) revenue pools are anticipated to grow at a compound annual growth rate of 8% between 2023 and 2028, supported by double-digit growth in software platforms and advanced data and analytics. The sales of innovative technologies such as generative AI to payers and providers are further supporting this growth.
In addition, pharmacy services, especially those focused on specialty pharmacy, are expected to see continued growth. The launch of new therapies and increased utilization are expected to be the primary drivers of this growth. McKinsey estimates specialty pharmacy revenue will grow at a compound annual growth rate of 8% between 2023 and 2028, growing EBITDA for managed service providers and specialty pharmacies.
Therefore, optimistic trends are materializing for the healthcare industry as a whole, including the medical device sector”.
AI and its Use in Healthcare: Is It All a Hoax?
Talking about the recent trends involving the increasing use of AI in the healthcare sector, Holz said that the scenario is possibly helping the software and technology companies more than healthcare ones. AI and its impact on drug development in clinical trials is another significant subject of discussion in the healthcare sector. However, Holz said that the industry is not really seeing the positive impact of the adoption of AI in the sector. Several clinical trials employing AI have failed in the recent past.
So, even though it seems that the science and technology behind the scenes is getting better, it hasn’t necessarily translated to better drug development and higher approval rates. Although he expects that the use of AI may lead to better results in the future, Holz believes that it is too early to make generalizations that the AI craze will lead to better results for biotech or pharma, at least in the near term.
Our Methodology
We used Finviz to screen healthcare stocks and looked at their year-to-date (YTD) performance, as of February 17, 2025, to select the best performing stocks. We also included the number of hedge fund holders for each stock as of Q3 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of year-to-date performance.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A doctor wearing a face mask and lab coat providing remote medical advice via video chat.
Teladoc Health, Inc. (NYSE:TDOC)
YTD Performance: 57.65%
Number of Hedge Fund Holders: 32
Teladoc Health, Inc. (NYSE:TDOC) provides virtual healthcare services and operates through two segments: BetterHelp and Teladoc Health Integrated Care. The BetterHelp sector covers its direct-to-consumer (D2C) mental health platform. Teladoc Health Integrated Care comprises a range of global virtual medical services, including specialty medical, expert medical services, general medical, mental health, chronic condition management, and more.
The company recently announced a collaboration with Amazon.com to increase the availability of its chronic condition programs. Qualifying Amazon customers can benefit from Teladoc Health, Inc.’s (NYSE:TDOC) chronic condition management programs, such as pre-diabetes, diabetes, weight management, and hypertension, through Amazon’s Health Benefits Program.
On February 5, Teladoc Health, Inc. (NYSE:TDOC) entered into a definitive contract to acquire Catapult Health, a digital preventive care services supplier, for $65 million in cash with an additional $5 million in performance-based compensation. The company plans to improve its comprehensive care solutions by implementing Catapult Health’s patient-focused approach to personalized supportive care and at-home testing. Subject to customary closing conditions, the transaction is expected to be completed in the first quarter of 2025.
Brown Capital Management Mid Company Fund stated the following regarding Teladoc Health, Inc. (NYSE:TDOC) in its Q2 2024 investor letter:
“Teladoc Health, Inc. (NYSE:TDOC) operates a telehealth platform that provides on-demand healthcare services to its members in the U.S. and abroad. Its solution connects consumers with physicians and behavioral health professionals who treat a range of conditions. The company offers its services through mobile devices, desktop, and by video or phone. Our initial excitement over Teladoc’s market-leading position, large market opportunity and compelling value proposition ran into the reality of the company’s deteriorating fundamentals. Competitive pressure, high customer-acquisition costs and poor customer retention significantly impaired the company since our initial purchase in March 2020. Additionally, questionable acquisitions and executive turnover further weighed on the business, resulting in revenue growth declining from the high-20s/low-30s to low-single-digits without any improvement in profitability. Although we pride ourselves on being patient and tolerant, it became obvious that our investment thesis was wrong, and we sold the company from the Fund.”
Overall, TDOC ranks 4th on our list of the best performing healthcare stocks so far in 2025. While we acknowledge the potential of TDOC, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TDOC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.