While it seems likely that the company’s next major device will be a virtual or augmented reality headset, I believe much of the incremental value will be derived from a much bigger opportunity: Healthcare.
A pivotal time for healthcare
The time is right for a healthcare revolution. Every nation on the planet struggles with some healthcare inefficiency that’s either directly or indirectly responsible for the loss of countless lives. On a broader level, developed countries tend to suffer from regulatory burden and lack of innovation while developing nations tend to suffer from lack of quality. Both suffer from varying degrees of accessibility issues.
The US spends more on healthcare than any other nation ($11,000 per person) and has one of the worst outcomes in the developed world. With better immigration policies and a universal healthcare system, Canada should have better outcomes. However, one-third of Canadians in rural parts of the country struggle to get medical attention when they need it and wait times for non-urgent care are notoriously bad.
In short, nearly every country is spending a lot on staying healthy but is fighting an uphill battle. Technology should, at least in theory, solve many of these issues.
Being able to connect with a doctor via text messages or video calls should solve the access, wait times, cost and perhaps even the immigration problems mentioned above. This telehealth and telemedicine revolution has been lurking around for years but was held back by regulations and data privacy issues. This final hurdle seems to have been cleared in 2020.
With an ongoing pandemic and everyone confined to their homes for months, regulations were relaxed and telemedicine finally started gaining traction. The Centers for Medicare & Medicaid Services offered US clinicians more flexibility in handling patient records and offering medical care remotely from any device. There also was a surge from the demand side. More patients signed up for their first virtual healthcare consultation during the lockdown than ever before. The majority of doctors and patients now say they will continue using these platforms in the future.
The telehealth revolution is finally here and Apple seems to be in a particularly good position to capitalize on it.
Any technology company that wants to disrupt healthcare needs a combination of deep pockets and public trust. Smaller startups are simply not going to be able to get innovations over the various regulatory hurdles and into the mainstream market. Meanwhile, a deficit of trust and public perception could dissuade people from sharing sensitive medical data with ad-driven giants such as Facebook (NASDAQ:FB) or Google (NASDAQ:GOOG) (NASDAQ:GOOGL).
According to a recent Verge Survey, Apple was the fourth-most trusted technology brand in the world.
Source: the Verge
Microsoft and Amazon are both more trusted than Apple, but Cupertino has two advantages over these trillion-dollar gorillas as well. Firstly, Apple has more cash on hand ($192b) than Amazon ($49b) and Microsoft ($137b) combined. Secondly, it has a wildly-popular device that people wear on their wrist throughout the day. Microsoft always has struggled to sell hardware while Amazon doesn’t yet have any device that can monitor body functions. Meanwhile, Apple already has deployed over 126 million Apple Watches since it was launched. Now, the company sells 23 new watches every minute, which is more than the entire Swiss watch industry combined.
These two critical advantages give Apple the best chance of cracking the healthcare industry and generating another trillion in shareholder value. In fact, the company already has taken some early steps in this direction that should make investors seriously excited.
In just five years since its launch, the Apple Watch has brought remote health tracking to more than 126 million people across the world. In the background, the company is working on pushing this further by adding more medical capabilities on its devices and partnering with major healthcare providers.
In 2017, Apple acquired SensoMotoric Instruments, a German startup that provides eye tracking hardware and software. In 2018, the company acquired Tueo Health, a startup that helps parents track their children’s asthma symptoms while they’re asleep.
Also in 2018, the company quietly launched a network of clinics for its California-based employees. Known as AC Wellness, the network employs over 40 people. The company also employs nearly 50 doctors directly. In 2019, the company partnered with healthcare insurance provider Aetna to create an app called Attain that lets users “earn off” the cost of their devices by staying healthy and tracking workouts.
This year, the team is collaborating with Google to create a COVID-19 contact tracing app.
All this is just scratching the surface. Perhaps the most pivotal healthcare technology is a device that Apple already has perfected over more than a decade – the cellphone camera.
The Department of Health and Human Services made it much easier for patients to seek medical consultations via Apple’s Facetime during the lockdown. The company recently filed patents seeking advanced telehealth capabilities in the near future. The ongoing mHealth project could allow medical professionals to manage and coordinate a patient’s care beyond the virtual consultation. In the future, a doctor could simply track a patient’s recovery after knee surgery or alert a patient about the need for a hip replacement remotely through the Apple Watch.
CEO Tim Cook once referred to health as the company’s “greatest contribution to mankind.” While that could certainly be true, these initiatives also could be an incredible contribution to Apple shareholders. The global healthcare sector is worth $11.9 trillion. The industry is worth $3.5 trillion in the U.S. alone. Taking a big bite out of this sector could certainly add tremendous value to what already is one of the most valuable firms on the planet.
This idea was first discussed (in much greater detail) with members of my private investing community, Betting on Tomorrow . To get an exclusive ‘first look’ at my best ideas, subscribe today >>
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.