How a Second Wave May Offer a ‘Mulligan’ for American Well Stock

One of the hottest — though somewhat underappreciated — initial public offerings (IPOs) this year has been American Well (NYSE:AMWL).  At the onset of the pandemic, few people wanted to venture out, let alone go to healthcare facilities. But, naturally the demand for medical consultations didn’t disappear during an international emergency. That’s when the telehealth industry stepped in, bolstering the case for American Well stock.

The logo for American Well (AMWL) displayed on a smartphone screen. The smartphone rests on top of a keyboard.
Source: Stephanie L Sanchez / Shutterstock.com

Out of the gate, AMWL has stormed higher since debuting around mid-September. But since hitting a peak of almost $42 on Oct. 7, the company has been trending inside a declining bearish channel. Much of that has to do with timing. Unlike its publicly traded rivals, the stock entered into the space after people became acclimated to the new normal. Still, I would take advantage of any discounted opportunities.

American Well Stock and Covid-19

For one thing, it’s possible that American Well stock could become a buyout target.

To be clear, I wouldn’t buy shares based on such a rumor. Nevertheless, the fact that this speculation exists points to the highly relevant business that underlines AMWL. As I’ll explain later, the bullish case will likely increase through this pandemic — and beyond it.

More importantly, we should recognize that — while Americans have gotten used to Covid-19 — we’re not out of the woods yet. There’s still much that we don’t know about the novel coronavirus. The only thing we know for sure is that close contact with the infected is an incredibly high risk factor.

According to The Lancet, a peer-reviewed medical journal, frontline healthcare workers “had at least a threefold increased risk” of contracting Covid-19. However, “adequate availability of PPE [personal protective equipment] did not seem to completely reduce risk among health-care workers” providing care for novel coronavirus patients.

If I’m interpreting the scientific data correctly, your best chance of avoiding Covid-19 is to stay away from high-risk transmission areas. Logically, this benefits American Well stock because its telemedicine business serves a great need via its contactless platform.

A Second Wave Is a ‘Mulligan’ for AMWL

Despite the immediate tailwinds for AMWL, it’s also fair to wonder if the pandemic will still provide upside for the telehealth company. At some point, this crisis will fade, which may pose a risk to shares.

But something that White House health advisor Dr. Anthony Fauci said makes me believe that American Well stock can continue to ride the novel coronavirus narrative. Last month, Fauci recommended that “we need to hunker down and get through this fall and winter because it’s not going to be easy.” Moreover, CNBC reported the following:

“Fauci noted that while new Covid-19 cases have decreased to less than 40,000 cases per day in the U.S. (a 16% decrease from two weeks ago, according to a New York Times database), that number is still ‘an unacceptably baseline,’ he said.

“’We’ve got to get it down, I’d like to see it 10,000 or less, hopefully less,’ he added.”

The problem is that the data from the Centers for Disease Control and Prevention says that the seven-day moving average at time of writing is over 59,000 cases. Not only are we not meeting Fauci’s threshold goal — we’re nearly six-fold above it. Off of this data, you can see why investors should still be considering American Well, despite being late to the game.

Additionally, we should look at Europe. The Wall Street Journal reported that Covid-19 cases are accelerating there as well, causing hospitals to ramp up their preparation for the winter. More than likely, the U.S. healthcare system will have to do the same.

All told, it’s completely possible that we could see an even worse second wave. And if so — as cynical and dark as it may be — that only helps the case for AMWL and investors who are thinking about jumping in.

Not All Doom and Gloom

That being said, it’s important to realize that the perniciousness of this crisis will not be a permanent circumstance. Yes, there is a possibility that the novel coronavirus could become endemic, meaning a vaccine might not be enough to stop it entirely.

But even so, I trust the resilience of the global community as well as my fellow Americans. In some way, shape or form, we’ll find a way to address this threat.

In that case, what happens to American Well stock?

The way I see it, AMWL will still be relevant post-pandemic. In fact, one of the selling points for the telehealth industry is its ability to provide convenience and comfort to patients. For instance, NBCNews.com reported that iatrophobia — or the fear of doctors — “affects just 3 percent of the population.”

That may seem small, but 3% of the U.S. population is roughly 10 million people. That’s a sizable consumer base that American Well can reach. And that’s what we know on paper. In reality, I’d be willing to bet that millions more have some form of iatrophobia. Or even, just prefer the convenience. That only adds to American Well’s addressable market.

Therefore, whether you get into AMWL for the pandemic or for the new normal, this is a relevant buy. Be sure to take advantage of any dips along the way.

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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