The COVID-19 pandemic has aided the growth of telemedicine as it helped reduce contact between healthcare staff, workers, and patients minimizing the risk of contracting the virus.
According to a market research report from Grand View Research, the telemedicine market on a global basis was estimated to be worth $55.9 billion last year and is anticipated to grow at a compounded annual growth rate (CAGR) of 22.4% between 2021 to 2028.
Using the TipRanks Stock Comparison tool, let us compare two telemedicine companies, Teladoc Health, and American Well Corp., and see how Wall Street analysts feel about these stocks.
Teladoc Health (TDOC)
Teladoc Health provides virtual healthcare services to clients including health plans, hospitals, employers, and insurance and financial services companies on a business-to-business (B2B) basis. The company generates revenues on a recurring contractual basis with a subscription access fee that is either on a per-Member-per-month (PMPM) or per-enrollee-per-month (PEPM) basis.
In certain contracts, the company charges fees on a per-subscriber basis and for some clients, TDOC charges access fees as well as visit fees. Most of the company’s revenues consist of access fees which made up 85.5% of the company’s total revenues in Q1.
Last month, TDOC announced its Q1 results. The company’s revenues soared 151% year-on-year to $453.7 million but losses widened as it reported a net loss of $199.6 million compared to a loss of $29.6 million in the same quarter of last year.
The company’s paid memberships in the United States increased 20% year-on-year to 51.5 million in Q1 and it expects paid membership to range between 52 million to 53 million in Q2.
In the second quarter, TDOC expects revenues to be in the range of $495 million to $505 million and adjusted EBITDA to land between $61 million and $64 million. The adjusted EBITDA forecast includes a benefit of $6 million from lower expenses on Livongo devices because of purchase accounting adjustments related to the Livongo merger.
For FY21, the company raised its revenue outlook and has forecast revenues of $1,970 million to $2,020 million driven by strong momentum in PMPM fees and higher utilization of its services, particularly when it comes to specialty visits. Teladoc expects adjusted EBITDA of between $255 million and $275 million, including a $20 million benefit due to lower expenses on Livongo devices.
In April this year, TDOC entered into an extensive agreement with Blue Cross Blue Shield to offer its whole-person virtual healthcare solutions to its members on the East Coast. As a part of this agreement, from early next year, the company will provide members access to its virtual healthcare suite of products including digital chronic care solutions.
The company commented on this deal at its earnings call, “This deal is notable as it covers all of the plan’s commercial books of business and represents another significant competitive takeaway. Moreover, it demonstrates the power of our broad and integrated suite of products and our proven ability to deliver industry-leading utilization and member engagement, which ultimately drives clinical and financial ROI for our clients.”
Earlier this month, the company launched an integrated mental health service that would provide targeted and personalized care to its consumers called myStrength Complete. This service is expected to be available to consumers in July this year through their health plans or their employers.
Teladoc’s acquisition of Livongo, valued at $18.5 billion, was completed last year and has been greatly beneficial for the company. In the first quarter, the company added 62,000 new members for Livongo’s chronic condition management suite of products.
As more members are opting for the Livongo chronic care suite of products, Teladoc’s revenues for its top 10 chronic care member accounts have risen year-over-year. According to the company, as 40% of adults in the United States have more than one chronic condition, Teladoc views a significant long-term opportunity for this service.
The company is also noticing a rise in specialty care services which is acting as a gateway to an increased usage of TDOC’s multiple services. TDOC stated at its earnings call that members who used its specialty care services also had 40% more general medical visits per member.
TDOC’s virtual healthcare solutions are also gaining traction in international markets as indicated by its partnership with MetLife in Australia and a strategic agreement with insurance carrier Generali Hong Kong to offer its services. (See Teladoc Health stock analysis on TipRanks)
Last month, Stifel Nicolaus analyst David Grossman lowered the price target from $234 to $195 and reiterated a Hold on the stock. The analyst commented on TDOC’s Q1 results in a note to investors, “We did not anticipate 1Q as a potential catalyst (+/-) and the same uncertainty relative to secular growth post-pandemic persists. Consensus assumes 31% and 25% revenue growth in 2022/2023, respectively, while 2021 unit growth remains flat to +4%.”
“While the pandemic pulled forward demand and skews the comparisons, we have little visibility on unit growth and pricing beyond this year other than management’s qualitative, but positive commentary about new sales, pipeline and increasing demand for multi-product solutions. At 12x 2022 revenue, it is difficult to advocate getting overly aggressive with this stock until visibility on unit growth and pricing metrics improve,” Grossman added.
Consensus among analysts on Wall Street is a Moderate Buy based on 13 Buys and 6 Holds. The average analyst price target of $235.11 implies 62.8% upside potential to current levels.
American Well Corp. (AMWL)
American Well Corp. is a telehealthcare company whose Amwell Platform is a complete digital healthcare solution for its clients. As of March 31, the company’s platform had powered telehealth services for around 55 health plans that supported approximately 36,000 employers.
The company generates revenues by offering the Amwell Platform on a subscription basis and in addition, fee-based professional services and access to AMG, a medical group affiliate that provides clinical services on a fee-for-service basis.
Last month, Amwell also unveiled its Converge platform, an open architecture, single cloud-based technology platform that can host and operate applications from third-party apps as well as provide unified digital care by hosting all the company’s products and programs.
AMWL is upbeat about the Converge platform and expects it to have a significant positive impact over multiple years on its financial performance starting from next year. The company expects to attract a greater number of clients, retain its current client base, and perceives upsell opportunities with this platform.
The company is also eyeing the international market with Converge as its open architecture can be expanded quickly and efficiently.
Earlier this month, the company reported strong results for the first quarter. The digital healthcare company reported a loss of $0.16 per share in Q1, which narrowed from a loss of $0.58 per share in the same quarter last year. The company generated revenues of $57.6 million, up 7.3% from the year-ago period.
Total active providers surged 240% year-over-year to approximately 81,000, while total visits increased 120% to 1.6 million in Q1. The company defines active providers as those who have delivered healthcare services over the platform over the past year.
The company passed a significant milestone in Q1 as total visits performed on the Amwell platform since inception surpassed 10 million.
In the second quarter, AMWL anticipates similar levels of services revenues to Q1. For FY21, American Well expects revenues between $260 million to $270 million while the AMG visit volume forecast is between 1.5 million and 1.7 million. (See American Well Corp. stock analysis on TipRanks)
The company expects to incur an adjusted loss before interest, taxes, depreciation, and amortization of between $157 million and $147 million in FY21.
Earlier this month, Needham analyst Ryan MacDonald reiterated a Hold on the stock following AMWL’s earnings. MacDonald said in a research note to investors, “Management aptly described the current state of the telehealth market, in which demand for services is in decline while demand for the enabling technology is increasing. This has led to excitement for the launch and adoption of AMWL’s new Converge platform.”
“However, with migrations taking place in the coming quarters, and little expectation for monetization before 2022, AMWL finds itself in a state of transition. As such, we await signs that Converge is accelerating the shift to higher margin subscription revenue via new bookings or expansion activity,” MacDonald added.
Consensus among analysts on Wall Street is a Moderate Buy based on 4 Buys and 6 Holds. The average analyst price target of $21.21 implies 78.2% upside potential to current levels.
While analysts are cautiously optimistic about both stocks, based on the upside potential over the next 12 months, AMWL seems to be a better buy.