Today, telehealth is here to stay and Amwell (AMWL) is one of the major beneficiaries. The company is a leading telehealth provider enabling digital care delivery for stakeholders across the entire healthcare ecosystem. The COVID-19 pandemic has brought on a surge of demand for telehealth services, which has enabled Amwell to benefit from the corresponding pull-forward of telehealth adoption.
Amwell’s focus on allowing clients to use their own providers to deliver care on a white-labeled telehealth infrastructure has been a unique differentiator. Amwell’s customers include 150 of the largest health systems (+2K hospitals), 55 health plans (+80 min covered lives), and a number of strategic relationships.
Amwell currently estimates an annual TAM of ~$35 bin ($3.7 bin for health system subscriptions, $8.7 bin for health plan subscriptions, & $22.1 bin in visits). The subscription TAM for health systems and health plans only contemplates that the 40 modules and 10 programs currently available are expected to increase and further drive upside to subscription TAM.
Based on the current focus and geographic profile, Amwell expects their LT revenue growth target to be in the mid-20s. From a margin perspective, Amwell has a LT GM target of +50% and adjusted EBITDA margin target in the mid-20s.
Credit Suisse’s analysts are modeling a 3 year revenue CAGR of 21% through 2023 with adjusted EBITDA not expected to be positive until 2024. The analysts believe there are several drivers which are likely to drive upside to their expectations.
This includes 1) A Second opinion program launched in partnership with the Cleveland Clinic, 2) The Virtual Primary Care product which allows members to engage with a continuing primary care clinician digitally before seeking in-person care, 3) Google partnership, 4) Conservative visit volumes, and 5) the recent focus on driving scalability and efficiency to the Amwell Platform. Recently the company hired an experienced CTO which should benefit margins.
Amwell shares were volatile last week on M&A related news reports. The analysts do not view the acquisition of Amwell by UNH very likely given the timing, as Amwell just offered their IPO). Also the fact that Amwell works with several other health insurers since ANTM is ~22% of Amwell’s revenues which would create a conflict of interest if they are owned by UNH.
Credit Suisse analysts report that they value Amwell shares on a fundamental basis. Their 2021 Year End TP of $41 represents 30x of our 2022 rev. estimates (essentially maintaining the current one year forward multiple 12 months from now.) Analysts believe a premium to other high growth companies is justified given the upside they see relative to their expectations and see risks to rating & TP to include any contract loss, providers scaling down telehealth investment, etc.
For more information and to provide feedback, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.