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Amwell is struggling to win over Wall Street as the telehealth giant gears up for healthcare’s new world

  • Telehealth company Amwell’s stock has dipped more than 75% over the past three months. 
  • That’s due to missing revenue targets, a general sell-off of stocks that performed well during the pandemic, and more factors.
  • In an April client day, Amwell didn’t do much to comfort investors.
  • See more stories on Insider’s business page.

Amwell, a

telehealth
company that went public in September 2020, has been hit hard in the stock market over the last three months. 

Since its high of $42.80 in January, it’s declined by more than 75% to $9.93 on Thursday afternoon.

The sell-off started roughly in February, as investors questioned whether the company had the growth potential to back up its then-$10 billion valuation. After that, its revenue fell short of expectations, and the company launched a new product that’s done little to quell their anxieties.

In the fourth quarter of 2020, the company gave full-year revenue estimates for 2021 — between $260 million and $270 million — below the midpoint of Wall Street’s consensus. 

For analysts and investors who thought Amwell would handily beat consensus, that put more pressure on the company’s client day on April 28.

Normally private events put on for customers don’t cause much of a stir, but this one had more than 1,000 attendees, per the company, among them investors looking for good news.

The event was heavily produced and “just weird,” one healthcare analyst told Insider, who was not authorized to speak on the record. It featured a three-minute tribute to the coronavirus pandemic and human ingenuity, and Amwell used the event to launch a new product, Converge. 

It’s a program for providers that can let them use multiple kinds of virtual care with one system, including from third-party apps. It’s rolling out at a time when health systems are figuring out how to lasso all their new digital health options.

Even so, Amwell’s stock immediately declined by 2% at the start of the event. 

Amwell’s revenue grew by 7% in the first quarter of 2021, it said on Wednesday, missing Wall Street’s consensus by about $1.2 million. Sean Wieland, a managing director at Piper Sandler, called it “short-term pain for long-term gain” in a Thursday note, pointing out that Converge will pay off in 2022 and beyond.

In an interview with Insider, co-CEO Ido Schoenberg said

healthcare companies
like Cerner and health systems are excited about Converge. Schoenberg also pointed out that Amwell’s subscription revenue, in which providers pay Amwell regularly to use its technology, is a growing driver of revenue. Subscription revenue, he said, is a sign of long-term growth, whereas visits can fluctuate.

“It’s not my role to really analyze the market,” Schoenberg said. “I can share with you that we’ve never been more bullish about Amwell and our future than we are today.”  

Amwell’s co-CEO unveiled a key new product at a vineyard

All eyes were on Amwell on April 28, after the company missed guidance in March. Analysts and investors were hoping to learn about what could help the company’s stock in the short-term, David Grossman, research managing director at Stifel, told Insider.

Amwell hosts a client meeting annually to discuss strategy and updates with customers like health systems, health plans, and employers that use Amwell and its technology. It’s usually a non-event, but this one stood out to analysts. It wasn’t open to the public. 

It started with a tribute to the coronavirus pandemic and the innovation it spurred in healthcare, featuring a voice-over from Schoenberg, according to footage seen by Insider. Then Schoenberg himself begins talking from a vineyard, which is his home.

“A lot has happened since the last time we were together. We were isolated more than ever before. And yet we feel more connected than ever,” Schoenberg said. 

He discussed Amwell’s growth, from 5,000 providers using Amwell in January 2020 to 72,000 in December 2020, and introduced the company’s new bet, Converge.

Demonstrations showed doctors using Converge to video chat with patients and see their medical history at the same time, plus a kind of app store, where health systems can access programs made by other companies.

Co-CEO Roy Schoenberg, Ido’s brother, spent most of his hour-long presentation explaining Converge, which he said will roll out gradually through 2021.

Lit by a spotlight on a dark stage, Roy hit on similar talking points, such as the perseverance of the human spirit.

Roy Schoenberg

Roy Schoenberg presents during Amwell’s client day in April 2021. The company showed an image of the planted American flag on the moon, a metaphor for how telehealth has planted its flag in its new place in the healthcare landscape.

Amwell


The Converge announcement didn’t provide any incremental insight, at least in the eyes of the market, on how the company could rebound in the near-term, Grossman said. Investors are still trying to figure out the company’s growth potential in a vaccinated world, he said.

“The event didn’t do it for them,” he said. 

Ido said that the client day was for clients, as is Converge. 

“What we’re building is a much higher margin profile, much more scalable, much more valuable, and much harder to compete with,” Ido said, comparing Converge to merely selling telehealth services.

The unnamed healthcare analyst said that money managers in particular were looking for more news, since their revenue projections for Amwell were more generous than Wall Street’s before the company’s March earnings.

“A lot of people hoped investor day would be more meaningful,” they said. “They were treating this as the next time Amwell would be able to message. And then there’s Ido in a vineyard.”

Amwell is facing external pressures 

Amwell’s woes extend beyond its recent client and earnings calls. The company is facing pressure from the market as a part of what analysts are calling a “rotation” out of stocks that performed particularly well during the coronavirus pandemic.

Amwell as a telehealth company saw unprecedented demand during the work-from-home era. Its online doctors’ visits, which are just a part of the overall business, skyrocketed by 1,279% from April 2019 to April 2020, for example.

Amwell’s rival Teladoc is down more than 50% since its high in February.

And the sell-off isn’t exclusive to healthcare. Snowflake, a software company boosted by the pandemic, has also seen a 50% dip since its high in December 2020.

Amwell Converge

A graphic showing how Amwell’s Converge connects disparate pieces of healthcare.

Amwell


Companies like Amwell are also having to compare their current revenue to last year when it was soaring, Grossman said. That can make future growth hard to predict.

In the third quarter of 2020, for example, Amwell’s quarterly revenue increased 80% compared to the same period a year prior. By comparison, now the quarterly revenue, announced on Wednesday, increased by just 7%, year over year.

“With COVID fading into the background it’s less clear exactly what real growth is going to be once we get past this,” Grossman said.

Another factor at play is Amwell’s business is changing. The telehealth company is moving more from providing one-off urgent care visits on its main platform to a business that supports health systems through a variety of channels. Eighty-percent of Amwell’s visits are now done by its clients’ providers, he said.

As that happens, health systems are starting to use Amwell’s software for more kinds of services.

“You can see the market is going from buying telehealth as a service, to enablement,” Ido said. 

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