Recent IPO American Well (NYSE:AMWL) is the latest way to gain exposure to one of the top megatrends, telemedicine. But, everybody on Wall Street already knows that. That’s why American Well stock has surged from its $18 per-share IPO price, at one point reaching a high of $41.80 per share. All in a matter of weeks.
But, while shares right now may be too hot to touch, consider this a buy on all pullbacks. Why? There are more than enough factors at play to make this a long-time winner.
Firstly, with novel coronavirus tailwinds, this company’s already-strong growth has accelerated since the start of 2020. Secondly, this blockbuster performance isn’t a one-and-done event. American Well has an extensive long-term runway. Thirdly, with the company making inroads into overseas healthcare markets, this could eventually become a play on global health trends.
There’s also another factor at play (more below) that’s helping to boost shares in the near term. But I wouldn’t buy on this factor alone. Instead, wait for enthusiasm to cool before entering a position.
3 Reasons Why American Well Stock Will Be a Winner
Right out of the gate, Wall Street was chomping at the bit to buy this stock. And that’s no surprise. There are multiple near-term and long-term factors that make this a solid opportunity. The one top of mind now is the company’s pandemic tailwinds. In April 2019, the company’s platform averaged 2,900 visits a day. In April 2020? A staggering 40,000 visits a day!
Out of the company’s cumulative 5.6 million telemedicine visits since 2006, more than half have happened in the past six months. Sure, you can chalk up this growth acceleration as a product of the outbreak. But, it just doesn’t seem likely that this rapid increase in its user base will disappear once things return to normal.
Why? Telemedicine is one of the key healthcare megatrends. As this technological innovation reduces costs and increases convenience, it will continue gaining critical mass. And, with the aging U.S. population, demand for healthcare services isn’t slowing down.
Put it all together, and it is clear American Well will continue to have growth runway in the coming years. But, despite its name, and its focus on America’s healthcare market, this isn’t exclusively a domestic play. The company has already branched into international markets like Israel.
And larger international markets are fully within reach. Given its cost-effectiveness, it’s easy to see both developed economies and emerging markets pivot toward telemedicine. In short, there are plenty of factors on its side to make American Well stock a long-term winner.
Wait for Takeover Rumors to Cool
The aforementioned factors alone aren’t the only reason why investors are hot for American Well stock. Takeover rumors swirling around the company are another reason why shares have nearly doubled since the IPO.
But, the last thing you want to do is chase these rumors and buy on takeover talk alone. I would never buy in anticipation of a takeover, and neither should you. Buy this stock only on the growth factors I detailed above.
The near-term boost from the takeover speculation is a key reason why it’s best to wait for a pullback. Sure, there has been some merger activity in this sector as of late. But, given this company just went public, it’s doubtful founders Ido and Roy Schoenberg are looking to cash out.
Why? There is real opportunity for this company to become a leader in the telemedicine industry. But, as these takeover rumors continue, expect shares to remain at today’s “too hot to touch” prices.
A Screaming Buy on Any and All Pullbacks
While I believe this stock has the makings of a long-term winner, now is not the time to buy. With Wall Street bidding up shares right out of the gate, today’s price level is not the best entry point. Add in the fact shares have been boosted by takeover rumors, and it’s easy to see this stock dip a bit in the coming months.
But, upside catalysts remain in motion. The pandemic has fueled adoption of the company’s platform. With the rising demand for healthcare in America, expect growth to continue in the years to come. And, with its ambitions to expand overseas, consider this a play on the global adoption of virtual healthcare services.
In short, consider American Well stock a screaming buy on any and all pullbacks.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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