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Last Monday, the stock market had its best day in 2021. The Dow Jones was up about 2%. The S&P 500 rose nearly 2.5%. And the Nasdaq was up 3%. It’s been a great day for almost everyone except those who have invested in a small, tall health tech company called Ontrak (NASDAQ: OTRK). On the same day the markets had their best day in 2021, OTRK stock had its worst day in five years, falling nearly 50% that day.
Ontrak, thanks to its robust AI-powered , data-driven platform for optimizing the outcomes of patients with behavioral disorders has been in hypergrowth mode for several years, lost its largest customer. Specifically, the company announced that its largest partner in the Health Plan will cease operations with Ontrak effective June 2021 and that Ontrak’s revenue growth rates will increase from 100% plus in 2019 and 2020 to just 20% in 2021.
This is bad news. But it’s not a deal breaker. On closer inspection, I actually see parallels between this situation and the loss of then largest customer Uber (NYSE: UBER) to Twilio (NASDAQ: TWLO) in 2016. Everyone thought that the loss of Twilio to Uber was the end of Twilio’s business Model. TWLO shares down.
But it wasn’t like that. Instead, it was a golden buying opportunity. Twilio’s business has done well since then. TWLO stock is up more than ten times.
It all starts with the overwhelming economic burden that uncovered behavioral health problems have on health care providers.
Did you know that one in five people find themselves with a behavior problem every year how to deal with addiction, depression or anxiety? That is a tragic statistic. It’s also expensive.
Patients with chronic illnesses (think people with diabetes, high blood pressure, coronary artery disease, and more) who also deal with behavioral disorders cost health plans up to 4.5 times more than patients with Chronic Illnesses Not Addressing Bra Problems, Mainly Due to Behavioral Disorders Health problems have an increased impact on the patient’s wellbeing, which extends recovery and / or creates new medical problems.
Makes sense. If you become addicted to your diabetes medication, you can alleviate your diabetes but create a whole new problem overall. Therefore, health insurers need to find a way to better identify, treat, and treat patients with bra problems better Dramatically reduce their costs.
Ontrak uses big data and AI to help health insurers better manage the costs and outcomes of patients with bra problems.
In particular, the company is selling its PRE platform ( Predict-Recommend-Engage) to health insurers. As the name suggests, the platform follows a simple three-step process: Through these three steps, the PRE platform enables health insurers to improve not only the outcomes of their bra patients, but also the cost of treating these patients drastically by reducing the likelihood that these patients will make their chronic illness worse.
That use of AI and data to optimize healthcare is the future – and Ontrak is leading the way in that future today.
That Ontrak’s business model sounds great. But more importantly – and more important to the success of OTRK stock – it works.
Ontrak’s AI algae do an excellent job of identifying patients with untreated behavior disorders. Approximately 97% of Ontrak members have not received any behavioral health services in the past 12 months.
The company’s unique approach to outreach and fingerprinting interventions is reaching a new segment of the population. Approximately 90% of the eligible Ontrak population are unaffected by health plan management programs.
Members who traverse the PRE platform love it and swear it works. Ontrak has an impressive Net Promoter Score of under 74 members.
And most importantly, the Ontrak PRE platform is doing exactly what it intends to do: Reduce the economic burden of bra issues on healthcare providers.
The customers of Ontrak – which already include big names like Aetna and Humana – have cut their healthcare costs for bra patients by over 50% on average.
The data here is crystal clear. Ontrak’s PRE program works. The company really uses big data to make big savings for big companies.
That’s a recipe for success. And this success has been shown in the numbers. In 2018 Ontrak’s sales grew 88%. In 2019 they increased by a further 134%. In 2020 they rose 136%.
Ontrak sales growth should hold its rapid pace of over 100% in 2021. Then the company lost its biggest customer. And now management is anticipating only 20% revenue growth this year.
Wall Street is clearly concerned that this customer exit is a sign of a continued dramatic slowdown in business. That’s right. After all, this big, nameless customer was clearly not satisfied with Ontrak. So they went. What can keep other customers from being dissatisfied as well and leaving Ontrak?
The answer to this question is surprisingly simple: Ontrak has a groundbreaking, proprietary technology platform that is delivering significant positive business results to its customers.
Sure, it didn’t work out well for this one customer. But Ontrak’s business with this big customer was not normal. The customer rated Ontrak on a vendor basis (not a vendor basis like any other health plan partner in the company). The customer also only allowed interaction with their behavioral health department (and banned interaction with their medical department, which is also abnormal). Also, the client didn’t like Ontrak’s coaching model, which Ontrak and many of its other clients see as a critical component of the PRE platform.
Overall, it wasn’t a normal deal – and I don’t think we can represent this loss of business as representative for the company’s entire deal portfolio, especially as Ontrak signs and renews contracts for every other customer in its pipeline.
If it weren’t for that, I’d be concerned. But it is the case. With that in mind, I think the fears of a sustained slowdown priced into OTRK stocks are exaggerated.
This situation where Ontrak is losing its biggest customer at a time when the company is growing over 100%, reminds me of Twilio in 2016.
At the time, Twilio was a cutting edge tech startup offering communication APIs for businesses looking to communicate with their customers. It was a Wall Street favorite. Revenues rose and TWLO’s share price soared.
Then suddenly Twilio’s biggest customer – Uber – left Twilio. The company anticipated a huge slowdown in sales growth. Wall Street freaked out, saying that everyone would follow in Uber’s footsteps and drive communications API development in-house. TWLO stocked up.
Nobody followed in Uber’s footsteps. Instead, they all used Twilio’s communication APIs because they were the best the market had to offer and it would have been impossible to develop such high quality products in-house. Twilio’s growth rates rebounded, and TWLO stock has risen more than ten-fold since then.
Most healthcare providers are not following in this unnamed customer’s footsteps. Instead, most will use Ontrak’s PRE platform as it is based on the best industry technology with proven and significant economic benefits. Ontrak’s growth rates will recover and OTRK stock will rise over the next few years.
Are 10X gains possible? Absolutely – considering this is a $ 500 million company developing a breakthrough solution in a $ 33.7 billion market.
Things are looking bad for Ontrak today after this company has lost its biggest customer. But things also looked bad for Twilio in 2016 after losing its biggest customer. Twilio has done well over the years since, as its industry leading technology has convinced every other customer to stay with Twilio. Ontrak should do the same for the next several years.
From that perspective, OTRK stock is possibly one of the best stocks to buy in the market right now.
Instead, is the best growth stock I buy today can, a company that reminds me of a young Amazon (NASDAQ: AMZN). In fact, I think buying this stock today could be similar to buying AMZN stock back in 1997 – before it rose thousands of percent.
Click here to see my very first Exponential Growth Summit and the Find out the name, the ticker symbol and the key business details of this potential 10-fold stock pick.
At the time of writing, Luke Lango had positions (neither directly nor indirectly) in the securities mentioned in this article.
Luke Lango covers early Investing in the hyper growth industry and putting you on the ground floor of changing global megatrends. That way, his 10X daily report has had an average return of 100% for all referrals since launching last May. Click here to see how he does it.
Luke Lango uncovers early investment in the hypergrowth industry and puts you on the ground floor of changing global megatrends.
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