After hitting a high of nearly $42 in early October on takeover speculation, shares of American Well Corp. AMWL are about where they were post-initial public offering, just short of $23. The Boston-based telehealth company recently reported its first quarterly earnings since going public, posting third-quarter revenue of $62.6 million, which was up 80% from the prior-year period.
The boost in revenue was fueled by the shift to electronic health care caused by the Covid-19 pandemic. The use of the technology for remote visits has been sliding somewhat since the early days of the outbreak, according to an article in FierceHealthcare. But that trend may reverse itself due to the recent explosion in cases, which many health professionals suggest will only accelerate as we move into the heart of winter, with more people indoors and holiday get-togethers.
Amwell's increase in revenue is encouraging, but investors have to be concerned that the company's losses in the third quarter climbed to $64.6 million, up nearly 170% from the same period a year earlier.
The company said telehealth visits are lower than what Amwell recorded in the early days of the virus, but still much higher than before Covid. Management sees increased demand, but stopped short of projecting visits for the fourth quarter.
"So many tried telehealth for the first time and so many loved it," Amwell chairman and co-CEO Ido Schoenberg said.
"Coupled with dramatic changes in reimbursement, we believe that Covid provided a strong tailwind to telehealth adoption and popularity," he added. "More importantly, we see clear growth in our client's readiness to invest in infrastructure to prepare for a new normal."
Business Insider reported the early October spike in Amwell's share price was based on analyst speculation that UnitedHealth Group Inc. UNH was going to make a run at the company.
"I'm hearing vague takeout speculation, given the move in the stock over the past few days," Jared Holz, a health care analyst at Jefferies, said at the time. Another analyst heard the same thing from its hedge fund clients.
When the stock shot past $40, analysts backed off takeover talk, thinking that Amwell had become too expensive. Might an acquisition now be back on the table since the company's market value is about half of where it was shortly after its IPO?
As reported in my Sept. 14 article, Amwell is backed by Anthem Inc. ANTM, Jefferson Health System, Takeda Pharmaceuticals Inc. TAK, and Alphabet Inc.'s Google GOOG.
Google's cloud division is investing $100 million in Amwell. As part of a strategic partnership between the two companies, Amwell chose Google Cloud as its preferred global cloud platform partner and will migrate its video performance capabilities onto the platform for both new and existing customers.
The company didn't say much about the Google relationship during its earnings announcement, other than the collaboration is underway.
FierceHealthcare reported the use of telehealth services in the U.S. has grown from 11% of consumers in 2019 to 46% in 2020. The demand for the service is expected to grow at nearly a 17% average annual rate, from $25.4 billion in 2020 to $55.6 billion in 2025, according to Markets and Markets. Amwell is chasing market leader Teladoc Health Inc. (TDOC), whose shares have more than doubled this year to $177.
Disclosure: The author has no position in any of the companies mentioned in this article.
Read more here:
- Novo Acquisition Gives It Unique Drug Delivery Technology
- Sales of Pfizer's Covid Vaccine Could Hit $4.6 Billion in 2021
- Hologic's Quarterly Sales Climb 56% on Demand for Covid Testing
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
