Healthcare is a great place to invest right now. Whether you believe that 2021 will be the last year that we’re worrying much about COVID-19, or you believe that Moderna CEO Stephane Bancel is right and that this coronavirus will be around forever (though not as a pandemic-level threat), there’s little doubt that there will be strong demand for quality healthcare services…
I see two healthcare stocks as having the potential to soar this year for very different reasons. American Well (NYSE:AMWL), or Amwell, could benefit from continued high demand for telehealth services, while AmerisourceBergen (NYSE:ABC) is positioned to thrive if conditions in the sector start getting back to normal and there’s an uptick in pharmaceutical sales.
1. The case for Amwell
Telehealth company Amwell only began trading publicly on Sept. 17. The stock is up around 30% since then (while the S&P 500 is up 15%), and there could be more gains to come. At a market cap of $7 billion, Amwell is just a fraction of the size of rival Teladoc Health, which is now worth more than $40 billion after its merger with Livongo Health. And the numbers Amwell has been generating have been phenomenal.
When it released its third-quarter results on Nov. 12, Amwell reported 1.4 million telehealth visits for the period — a 450% increase year over year. Revenues of $62.6 million were up by 80%. Although the company did incur a net loss of $64.6 million, poor bottom-line performances haven’t exactly hurt Teladoc — it has posted losses in each of its past five quarters.
And Amwell could accelerate its growth by making it easier for hospitals to offer telehealth services. On Feb. 18, it announced the launch of Hospital TV 100, a device that will allow hospitals to convert televisions they already have into telehealth endpoints. These can enhance social distancing and safety for health professionals while making it easier for them to keep tabs on patients.
Even though healthcare professionals are administering COVID-19 vaccines at a fairly rapid clip, it could still be some time before the pandemic is over. And in the meantime, the demand for telehealth services will remain high.
With its smaller size and a focus mainly on telehealth (Teladoc, by contrast, has been expanding into other areas, such as chronic condition management), Amwell is more of a pure-play in this area than its rival is. That could give it more of an opportunity to soar if demand for telehealth services intensifies this year.
2. The case for AmerisourceBergen
Some investors may want to hedge their bets optimistically for the possibility that the spread of COVID-19 will keep declining sharply, to the point where hospital operations will be able to start getting back to normal. One way to do that would be to invest in medical distribution company AmerisourceBergen.
For the past year, patients haven’t been eager to visit physicians or hospitals due to fear of contracting the coronavirus. That has been a headwind for sales of pharmaceutical products.
In AmerisourceBergen’s fiscal 2020 third quarter, which ended June 30, sales were…
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