Telehealth company
American Well Corporation (NASDAQ: AMWL) stock went public during the pandemic and hasn’t seen the price momentum spikes like familiar telemedicine stocks like
Teladoc (NASDAQ: TDOC) and
Ontrak (NASDAQ: OTRK). Shares are still outperforming benchmark
S&P 500 index (NYSEARCA: SPY). Unless you are familiar with the company, it’s easy to mistake it for an oil and gas business judging by the name alone American Well Corporation. The Company went public on Sept. 16, 2020 and peaked at $41.80 before sinking to lows of $22.11. Prudent investors looking for a yet undiscovered telehealth play can monitor opportunistic pullback price levels to gain exposure after its first earnings report as a publicly listed stock to the bar moving forward.
First-Half 2020 Metrics
AMWL was already showing a 30% year-over-year (YoY) revenue growth from 2018 to 2019 as top-line grew from $114 million to $140 million, respectively. When the COVID-19 pandemic struck, the Company saw revenues surge to $222 million in the first-half of 2020, indicating a 70% YoY growth. Total monthly patient visits on the platform for Dec. 2019 averaged 114,000. At the height of the pandemic in April 2020, total monthly visits surged to a whopping 912,000. However, that has peaked as isolation mandates lifted and economic restarts accelerated enabling patients to resume in-person doctor visits. The Company managed to go public at the height of the pandemic surge, which resulted in the initial run up on the hype and a sell-the-news effect when investors realized those numbers likely won’t be repeated. The margins continued to get squeezed as the Company builds out its platform and network of customer which has grown to over 150 largest health systems including over 2,000 hospitals and 55 health plans covering over 80 million patients. This begs the question of what the normalized rate of growth is post-pandemic.
Credit Suisse Analysis
On Oct. 12, 2020, Credit Suisse started coverage of AMWL with an outperform rating and a $41 price target based on a 30X 2022 revenues. They note the main differentiating factor being the ability for customers to use their own medical providers on their white-labeled telehealth platform. The total addressable market (TAM) is estimated around $35 million composed of $3.7 billion for health system subscriptions (IE: hospitals and doctors), $8.7 billion for health plan subscriptions (IE: insurers) and $22.1 billion in patient visits (wildcard). Credit Suisse also notes this only takes into consideration for the existing 40 modules and 10 programs in use now but expects that to expand and further drive up TAM. Additional drivers include the Google partnership, second opinion program and a virtual Primary Care product. The Company has a notable partnership through a $100 million investment from Google (NASDAQ: GOOG)as well as Allianz Digital Corporate Ventures and Teva Pharmaceuticals (NASDAQ: TEVA).The Google partnership could lead to many potential drivers including integration into its Fitbit watches and network of users.
The “New Normal” Baseline
Unlike shares of TDOC and OTRK which went parabolic due to the pandemic catalysts, AMWL timed its public offering after the pandemic peaks to derive a richer multiple with an upsized IPO offering. Telehealth visits peaked out at the height of the pandemic in April for both TDOC and AMWL. The $244 million annual run rate takes into assumption that the first-half 2020 elevated traffic would repeat in the second-half 2020, which even the CEO Ido Schoenberg cautioned investors not to expect moving forward. The market may very well set a high bar despite the warning to rationalize expectations. There is no doubt that the pandemic accelerated patients towards using telehealth services especially remote doctor visits. The question is how “sticky” this behavioral change can be moving forward into the “new normal”. This will set a more realistic baseline to measure growth and the potential for multiple expansion. More color can be expected on the Q3 2020 earnings release and conference call. Investors will prefer a lowering of the bar to get cheaper valuations on opportunistic pullback levels for exposure.
AMWL Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for AMWL stock, especially with the limited trading data since it’s a relatively new IPO. The weekly rifle chart is just starting to get enough data to form a 5 period moving average (MA) which shows a resistance and potential breakout level at $31.39 Fibonacci (fib) level. This daily rifle chart formed a market structure low (MSL) buy trigger on the $26.21 breakout as the stochastic cross back up through the 20-band. The daily market structure high (MSH) sell was triggered on the breakdown under $35.82, which makes that level a key resistance area. Prudent investors can watch for opportunistic pullback levels at the $26.61 fib, $24.63 fib, $23.45 fib and the $22.11 fib to build up a position. The upside trajectory range is the $35.82 to $41.80 post-IPO highs with further upside towards the $54.33 fib. Traders should watch the price action with competitor TDOC to gauge overall investor sentiment.
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