On Thursday, Piper Sandler reiterated a neutral stance on American Well Corp. (NYSE:AMWL), maintaining a $2.00 price target. The firm's analysis follows a recent demonstration of AMWL’s behavioral health solution at the Defense Health Agency (DHA). During a group investor meeting last week, several members of AMWL’s executive and product management teams provided insights into the solution's deployment.
The firm acknowledged the positive developments with AMWL's marquee customer Converge migrations, which could present an opportunity for the company to secure high incremental gross margin software revenues as the DHA continues its multi-product rollout. Despite the potential, Piper Sandler remains cautious, emphasizing the need for stabilization in subscription revenue and clearer signs of American Well's projected return to double-digit growth in the calendar year 2025 before changing its recommendation.
American Well's engagement with the DHA highlights its efforts to expand its presence within the healthcare solutions sector, particularly in behavioral health. The company's executive and product management teams have been actively involved in showcasing their latest offerings to investors, demonstrating their commitment to advancing their product suite.
The firm's neutral rating reflects a wait-and-see approach, requiring further evidence of American Well's financial performance and growth trajectory. Piper Sandler's stance indicates a need for observable improvements in the company's subscription revenue streams and overall growth patterns before considering a more favorable rating.
The price target of $2.00 set by Piper Sandler serves as a benchmark for investors, aligning with the firm's current assessment of American Well's market position and future prospects.
InvestingPro Insights
Piper Sandler's neutral stance on American Well Corp. (NYSE:AMWL) is echoed by the recent performance metrics and market sentiment captured by InvestingPro. With a market cap of a modest $122.71 million and a stock trading near its 52-week low, the data underscores the challenges faced by the company. In particular, AMWL's price to book ratio in the last twelve months as of Q1 2024 stands at 0.3, suggesting that the market values the company at significantly less than the value of its assets.
From an operational standpoint, American Well's revenue growth has declined by 8.08% over the last twelve months as of Q1 2024, which may give credence to Piper Sandler's cautious outlook for the company's near-term revenue stabilization. Additionally, the company's negative price total return over the last year of -81.27% reflects the market's reaction to American Well's financial performance and growth prospects.
InvestingPro Tips highlight that while AMWL holds more cash than debt on its balance sheet, it is quickly burning through cash and analysts do not anticipate the company will be profitable this year. These insights, combined with the company's current valuation implying a poor free cash flow yield, may be of particular interest to investors considering Piper Sandler's analysis.
For those looking to delve deeper into American Well's financial health and market position, InvestingPro offers additional tips beyond these insights. To explore these further and to take advantage of the comprehensive analysis offered by InvestingPro, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 12 more InvestingPro Tips available for AMWL, which could provide investors with a more nuanced understanding of the company's potential trajectory.
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