Many companies are excited about the potential for the metaverse and what a vast online world could do for building their businesses. In basketball, the NBA's New Jersey Nets allowed fans this year to virtually watch a game on its "Netaverse." Last year, apparel company Nike announced it was partnering with Roblox, which runs an online gaming platform, to develop an online world where users can play games like dodgeball in a virtual "Nikeland."
The possibilities for the metaverse appear endless. But amid all the hype, investors may be overlooking the potential for healthcare's role in the metaverse. And one company that could be a big player in that area is CVS Health (NYSE: CVS).
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CVS is getting trademarks ready for the metaverse
In a filing with the U.S. Patent Trade Office last month, CVS applied to trademark applications for its operations so that it can provide its customers with online retail services, which include downloadable virtual goods and non-fungible tokens (NFTs). The filing also includes multiple references to "online virtual worlds," without naming the metaverse directly. It's clear from the filing that the company does have an idea of what kind of a role it will play in the metaverse even if it hasn't made any big moves in that direction just yet.
Telehealth, for instance, could be one of the more practical examples of offering healthcare services in an online world where patients can remotely connect with physicians. And using wearables like the Apple Watch and other devices that can easily transmit data online, some in-person visits to the doctor's office can undoubtedly be replaced with virtual ones.
That's already happening today as the telehealth market presents an exciting, long-term growth opportunity. Analysts from Grand View Research project it could be worth a whopping $787 billion by 2028, growing at a compound annual rate of 36% until then. And with the metaverse, that potential could surely grow even higher.
CVS is already in an excellent position to capitalize on that growth through its MinuteClinic, which makes video visits available in nearly every U.S. state.
A great play to balance safety with growth
Getting into the metaverse may seem like a surprising move for CVS, a company that's known for being a relatively safe healthcare stock to buy. However, a business needs growth opportunities, and the metaverse is full of them; Ark Invest's Cathie Wood believes the digital world could be worth trillions of dollars, impacting "every sector in ways that we cannot even imagine right now."
For CVS, getting its trademarks ready is an important first step. And as it becomes possible to execute on some of the opportunities in the metaverse, CVS could be in an excellent position to do so. Unlike many up-and-coming tech companies looking to cash in the metaverse, CVS already has a strong, profitable business that can give it plenty of resources to safely grow. In 2021, its net income totaled $7.9 billion. And more importantly, the business also brought in $15.7 billion in free cash flow during the year, more than double the $6.8 billion CVS reported in 2018.
The company's robust financials give it plenty of money to potentially invest in the metaverse, develop NFTs, or work on enhancing its digital health services.
Should you invest in CVS on this news?
CVS looking to get into the metaverse is encouraging, but investors also should be careful not to read too much into this just yet. What the metaverse will end up looking like and how much sales CVS might generate from it in the years ahead is anyone's guess at this point.
More importantly, the filing demonstrates CVS' focus on exploring new growth opportunities, wherever they may be. By filing for trademarks, the company is simply covering its bases and ensuring that its logo and business are protected in the digital world.
CVS is a solid investment -- with or without the metaverse. Its strong, consistent profits and important role in the healthcare industry with its pharmacies and health insurance plans (through Aetna), make it an incredibly safe long-term buy. Plus, paying a dividend that yields 2.2%, which is better than the S&P 500 average of 1.3%, only sweetens the deal.
If you were going to invest in CVS before, this development certainly doesn't make the stock any worse of a buy. But you shouldn't invest because of the trademark application, as any revenue CVS generates from the metaverse could still be years away.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple, Nike, and Roblox Corporation. The Motley Fool recommends CVS Health and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
