A Morgan Stanley analyst sees healthcare as a $15B-$313B revenue opportunity for Apple by 2027
Alexa is moving into healthcare, with Amazon (AMZN) announcing a program allowing select developers to create and launch HIPAA-compliant healthcare skills for the company’s voice assistant. Amazon was one of the technology companies identified by participants in a recent Morgan Stanley survey as potentially having the largest impact on healthcare over the next five years, alongside Google (GOOGL; GOOG) and Apple (APPL). However, analyst Katy Huberty argued that participants may be underestimating the iPhone maker as she believes Apple is building a healthcare ecosystem and is “poised to emerge as a leader in consumer-centric healthcare.”
ALEXA TO TRACK CONSUMER HEALTHCARE: Over the weekend, The Wall Street Journal’s Melanie Evans reported that Amazon is positioning its AI assistant Alexa to track users’ prescriptions and relay personal health information in an effort to involve the technology in everyday healthcare. Five companies including Cigna (CI), Livongo Health and some major hospital systems have developed Alexa features for consumers using federal protocol, the publication added. This follows Amazon’s announcement last week that “the Alexa Skills Kit now enables select Covered Entities and their Business Associates, subject to the U.S. Health Insurance Portability and Accountability Act of 1996, HIPAA, to build Alexa skills that transmit and receive protected health information as part of an invite-only program. Six new Alexa healthcare skills from industry-leading healthcare providers, payors, pharmacy benefit managers, and digital health coaching companies are now operating in our HIPAA-eligible environment. In the future, we expect to enable additional developers to take advantage of this capability.”
APPLE OPPORTUNITY UNDERAPPRECIATED: Apple is building a healthcare ecosystem and is “poised to emerge as a leader in consumer-centric healthcare,” Morgan Stanley’s Huberty told investors in a research note on Monday. The analyst pointed out that the center of gravity is shifting in U.S. healthcare, as wearables, electronic medical records, and proposed regulations are enabling data to flow more freely between silos and stakeholders. Huberty sees healthcare as a large, greenfield services opportunity for Apple, which has the potential to lead digital disruption, much like what iTunes did for music or the App Store did for mobile services. The company’s healthcare strategy appears to aim for an ecosystem that puts the consumer at the center, she contended, noting that the Apple Watch has evolved into a “health monitoring guardian and guru.”
Further, Huberty argued that armed with the Apple Watch and the iPhone, Apple is emerging as “an agent of change” in healthcare and a “leader among tech companies entering the space.” While the analyst sees room for contribution from many technology companies in reducing the estimated $1.2T of wasted U.S. healthcare spending while at the same time improving outcomes, she believes Apple’s advantages include its outsized user base, particularly in wearables; a proven services platform; and trust as a steward of data privacy. Investors are aware of Apple’s healthcare efforts, but the analyst believes they “may be missing the big picture and underappreciating the magnitude of the opportunity.” Huberty noted that her firm’s recent survey of 30 meeting participants, three-quarters of them C-level executives from leading healthcare and technology companies, showed that those polled see Amazon, Google and Apple as the technology companies that will have the largest impact on healthcare over the next five years, in that order of concentration of votes. However, they seem to be underestimating what Apple can accomplish, she thinks.
Overall, the analyst told investors that she sees healthcare as a $15B-$313B revenue opportunity for Apple by 2027. Huberty believes there are two clear paths to monetization, namely wearables and services. Sustained 40% growth in wearables alone implies Apple would reach the low end of that $15B-$313B target by 2021, she said, while access to free applications increases the value of Apple’s platform and helps the company sell more devices and its own services. Additionally, the analyst sees iCloud possibly becoming the go-to cloud service for storing individual’s health data. Huberty reiterated an Overweight rating on Apple’s shares.
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