The Netflix of Medicine: Why Digital Health Care Represents an Enormous Stock Opportunity
It’s no secret that Netflix Inc. (NASDAQ: NFLX) has dramatically transformed the way people around the world consume media on a daily basis.
Before Netflix came around, if you wanted to watch a movie in the comfort of your own home, you’d have to drive out to Blockbuster or Hollywood Video just to get it.
When you were done watching, you’d have to hop back in your car to drop the video off, and to make matters worse, you were on the clock because of those dreaded late fees. Looking back, it’s crazy to think about all the hoops we used to jump through just to watch a movie on our own TVs.
Yet while it somehow feels like those days were forever ago, it was only in 2007 when Netflix first started offering its now pervasive subscription streaming service. Since then, the company has quickly rocketed to one of the most powerful media companies on the planet and has cemented itself as an absolute giant in the world of tech.
In its incredible success, Netflix not only completely revolutionized media consumption but also managed to reward its loyal investors with some of the best returns in stock market history. Since launching subscription streaming in 2007, the company’s market capitalization has launched from $1.5 billion to $126 billion.
That’s a gain of ~80x in just over a decade.
It should go without saying that those are the kinds of investment returns that would change a person’s life. Try to imagine, for a moment, knowing what you know about Netflix today, but 10 years ago. If you had $10,000 to invest, you’d be sitting on close to an $800,000 payday
Of course, it's an exercise in futility wallowing in notions of what could have been, but the story of Netflix also shouldn’t be passed off as a simple matter of hindsight. It’s actually a very important lesson on the power of digital disruption.
The Holy Grail of Growth Stocks
For consumers, the benefits of Netflix’s streaming model are obvious enough. Not only is streaming movies and shows from your couch far more convenient than VHS and DVD rentals, but it ends up being cheaper if you consume enough of it.
For investors, though, the benefit is even more meaningful. By eliminating the need for physical media, Netflix is able to reduce its operating expenses substantially. Less real estate, less shipping, and fewer employees all translate to higher profit and higher stock returns.
Not only are operating expenses reduced, but the ability to scale is infinitely higher. It takes time to acquire new storefront, hire new employees, and expand operations on a global scale when you’re a physical business. When your product is delivered digitally, though, the process is streamlined, which is why Netflix’s revenue has spiked from $277 million to $127 billion since it first launched streaming.
Rapidly scalable and low OpEx. When it comes to growth investing, these business attributes make up your holy grail.
Of course, Netflix isn’t the only example of this kind of digital disruption launching a small company into the stratosphere...
Take, for instance, what Apple did to music in 2001. Remember going on a run with a Sony Discman strapped to the back of your hand? Remember mix tapes? How about sifting through CD wallets in your car? Yeah, well, those days are gone for good.
The same way Netflix drove Blockbuster Video into its grave, Apple did the same for Tower Records and the rest of the retail music industry with the release of the iPod. Today, music streaming is a multibillion-dollar business, and it’s growing at a rapid pace. In 2017, streaming revenue from services like Apple Music and Spotify grew 48%.
Of course, there’s a lot more to Apple’s success than just music streaming, but it goes to show the power of turning a physical product into a digital format. Without the initial success of the iPod, it’s likely that Apple wouldn’t even be around today. After all, the iPhone is really just a modern counterpart of the iPod.
To put it simply, investors should never underestimate the scalability of digital-delivery models. When you see a company controlling an emerging digital market, like Netflix did with movies or like Apple did with music, it’s wise to take note. There are few other stock opportunities that can provide investors a 7,830% 10-year return.
The question for opportunists, of course, is what industry is next in line for digital disruption? Movies, music, and books have all been digitized already, so what’s next?
Believe it or not, the latest industry to experience a digital transformation is health care, and it’s happening at this very moment.
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They Call it “The Netflix of Medicine”
Even though it’s relatively new, the digital health industry has already shot from $240 million in 2013 to $2 billion today.
But the truth is that this is just the beginning. Two years from now, the digital health market is predicted to be worth $86 billion...
And by 2024, it’s set to hit $379 billion.
All told, we’re looking at 18,850% growth over the next six years, which obviously represents a huge opportunity for early investors.
As Fortune puts it, "The business of medicine is inefficient, expensive, and ripe for disruption."
And as the National Business Group on Health (NBGH) found in a recent survey, a staggering 90% of companies plan to make digital health services available to their workers this year.
Perhaps what’s most appealing, though, is that the digital health market is being dominated by one little-known company still in its early stages of growth.
Folks around the office are getting excited, calling this stock “The Netflix of Medicine,” and it's no wonder why.
Not only did this company just add 50,000 new doctors to its remote health care services, but it already works with more than 30 health plans across the United States. Not to mention, it controls ~75% of the existing digital health market.
The opportunity is big enough that we’ve put together an exclusive report on this stock, which we’ll be releasing in two weeks, so be sure to keep an eye out for that on March 15th.
Until next time,
Jason Stutman is Wealth Daily's senior technology analyst and editor of investment advisory newsletters Technology and Opportunity and The Cutting Edge. His strategy for building winning portfolios is simple: Buy the disruptor, sell the disrupted.
Covering the broad sector of technology and occasionally dabbling in the political sphere, Jason has written hundreds of articles spanning topics from consumer electronics and development stage biotechnology to political forecasting and social commentary.
Outside the office Jason is a lover of science fiction and the outdoors, and an amateur squash player at best. He writes through the lens of a futurist, free market advocate, and fiscal conservative. Jason currently hails from Baltimore, Maryland, with roots in the great state of New York.
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