The boom in digital healthcare has been a roller coaster for investors, with shares of leading public telehealth companies soaring in 2020, before tumbling this year amid growing competition and uncertainty about the future of the sector.
American Well (ticker: AMWL), which went public in September and calls itself Amwell, has followed that same trajectory. The stock rose 10% between mid-September and the end of 2020, and then spiked in late January before starting to fall.
Shares are down more than 70% from the stock’s high of $43.75, which it hit on Jan. 27.
Amwell reported first-quarter earnings after the market closed Wednesday, slightly missing Wall Street revenue estimates. The company reported revenue of $57.6 million, just below the FactSet consensus estimate of $58.8 million. Amwell shares were down 6.5% on Thursday morning.
The earnings come as Amwell prepares to introduce a new product known as Converge, a telehealth platform that the company says will have a significant impact on its financial performance.
Amwell reiterated its guidance for the full 2021 fiscal year, forecasting revenue of between $260 million and $270 million. In a note out late Wednesday, Stifel analyst David Grossman wrote that the guidance implies a “meaningful revenue ramp” in the second half of the year.
“While some 2H ramp is reasonable, given the lack of visibility relative to the new platform, we have modeled 2021 slightly below guidance,” wrote Grossman, who rates the stock a Hold. He lowered his price target to $14, from $21. The stock was trading around $11.98 on Thursday morning.
Investors have worried that telehealth firms like Amwell and competitor Teladoc Health (TDOC) will suffer amid growing competition, including from Amazon.com (AMZN), through a new offering called Amazon.com Care.
“It is no secret that competition in the virtual care space continues to accelerate,” Evercore ISI analyst Elizabeth Anderson wrote in a May 6 note. “In the next few years, a segment of employer-based contracts will come up for renewal which could create an incremental opportunity for well-capitalized upstarts like Amazon Care to more meaningfully enter the mix.”
Amwell’s co-CEO, Ido Schoenberg, tells Barron’s that his company’s offerings are differentiated from its competitors.
“Telehealth for many, many years was really a service for urgent care,” Schoenberg says. That has now expanded to primary and specialty care, he says. That market has a low barrier for entry, and more competitors are flooding in.
“If we were solely in the business of telehealth as a service, I would be really worried,” he says. “But the DNA of Amwell is, at its core, a technology company. And what we do is enabling digital connectivity, well beyond visits… That’s a very hard act to follow. That’s much more complicated.”
Amwell, Schoenberg said, can connect patients to doctors and hospitals with which they already have relationships, and offers links between devices and data that other providers lack.
“That’s very hard to do,” he says. “It took us 15 years. We spent over a billion. We’re spending a ton of money right now on making it much better with our new platform. But the value of such a platform is much, much greater than the service-oriented urgent care, or primary care, online-focused services.”
Of the quarterly earnings report, Schoenberg notes that there are “a lot of indicators” in the report that the company is shifting from the more crowded service telehealth business to the subscription technology business.
“Our subscription revenue grew,” he says.
On an earnings call on Wednesday night, analysts asked Schoenberg how the new platform, Converge, would add to Amwell revenues.
“We believe that with Converge, every client will use the platform more,” Schoenberg said on the call. “It’s much nicer and easier to use. It offers many more options and so on and so forth. We also believe it’s more likely that clients that had a certain plan for scale, the membership or the audience for the platform, for a long list of different reasons, are likely to expand it even more with Converge.”
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