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It's been a mediocre week for American Well Corporation (NYSE:AMWL) shareholders, with the stock dropping 14% to US$17.75 in the week since its latest yearly results. Sales of US$245m came in 2.6% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$2.27, a 10% miss. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the ten analysts covering American Well are now predicting revenues of US$266.1m in 2021. If met, this would reflect a notable 8.5% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 80% to US$0.83. Before this latest report, the consensus had been expecting revenues of US$269.7m and US$0.82 per share in losses.
As a result, it's unexpected to see that the consensus price target fell 24% to US$27.50, with the analysts seemingly becoming more concerned about ongoing losses, despite making no major changes to their forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on American Well, with the most bullish analyst valuing it at US$35.00 and the most bearish at US$21.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that American Well's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 8.5% growth on an annualised basis. This is compared to a historical growth rate of 65% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 16% per year. Factoring in the forecast slowdown in growth, it seems obvious that American Well is also expected to grow slower than other industry participants.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that American Well's revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of American Well's future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple American Well analysts - going out to 2025, and you can see them free on our platform here.
You still need to take note of risks, for example - American Well has 3 warning signs we think you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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