Healthcare is currently an excellent place to invest. Whether you believe that 2021 will be the last year in which we worry a lot about COVID-19, or that you believe it Modern CEO Stephane Bancel was right and that this coronavirus will last forever (although not as a pandemic-level threat), there is little doubt that there will be a strong demand for quality healthcare services .
I see that two health stocks have the potential to rise this year for many different reasons. American well (NYSE: AMWL), or Amwell, could benefit from the continuing high demand for telecommunications health services, while AmerisourceBergen (NYSE: ABC) is in a position to thrive if conditions in the sector return to normal and there is an increase in pharmaceutical sales.
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The case for Amwell
The Telehealth company Amwell only started trading in public on 17 September. The share has since risen by about 30% (while the S&P 500 is 15% higher), and there may be more gains. With a market capitalization of $ 7 billion, Amwell is only a fraction of the size of the competitor Teladoc Health, which is now worth more than $ 40 billion after the merger with Livongo Health. And the numbers Amwell generates were phenomenal.
When it announced its third quarterly results on November 12, Amwell reported 1.4 million telehealth visits for the period – an increase of 450% year-on-year. Revenue of $ 62.6 million increased by 80%. Although the company suffered a net loss of $ 64.6 million, Teladoc’s poor performance did not exactly hurt – it has shown losses in each of the past five quarters.
And Amwell can accelerate its growth by making it easier for hospitals to offer telecommunications health services. On February 18, it announced the launch of Hospital TV 100, a device that allows hospitals to convert televisions they already have into television health endpoints. It can improve social distance and safety for health workers, while making it easier for them to keep an eye on patients.
Although health workers administer COVID-19 vaccines fairly quickly, it may take some time before the pandemic is over. And meanwhile, the demand for telecom health services will remain high.
With its smaller scope and mainly focus on telecom health (Teladoc, on the other hand, has expanded to other areas, such as chronic condition management), Amwell is more of a pure game in this area than its competitor. This could give him more chances to rise as the demand for telecom health services increases this year.
2. The case for AmerisourceBergen
Some investors want to optimally cover their commitment to the possibility that the distribution of COVID-19 will decrease sharply, until the hospital operations can return to normal. One way to do this is to invest in the medical distribution company AmerisourceBergen.
In recent years, patients have been reluctant to visit doctors or hospitals because they were afraid of contracting the coronavirus. It was a big windfall for the sale of pharmaceutical products.
In the third quarter of AmerisourceBergen in fiscal 2020, which ended June 30, sales rose just 0.3% year-over-year, in part due to COVID-19; sales were highlighted as the pharmaceutical products were in stock during the early stages of the pandemic. In its fiscal fourth quarter, sales growth declined to 7.9%. And when it announced its fiscal results for the first quarter of 2021 on February 4 (for the last three months of calendar 2020), revenue reached $ 52.5 billion and grew even higher – 9.7%. AmerisourceBergen also upgraded its 2021 fiscal guidelines. Previously, it had predicted that the growth would be in the mid-single-digit percentages. Now it expects growth in the high-single-digit percentages.
One reason to be optimistic about its growth prospects – the company is expanding. Earlier this year, AmerisourceBergen acquired a majority stake in Alliance Healthcare. Walgreens Boots Alliance for $ 6.5 billion. The move will help expand the company’s footprint, particularly in Europe, where Alliance is one of the largest pharmaceutical wholesalers. While Walgreens and AmerisourceBergen work together under a strategic partnership in the US, and the pharmacy retailer owns nearly 30% of AmerisourceBergen, the two companies focus on different areas: wholesale versus retail.
Over the past twelve months, the shares of AmerisourceBergen have risen by 8%, while the S&P 500 has increased by 16%. However, once patient visits rise to pre-pandemic levels, pharmaceutical products should have greater demand. That alone should drive up the stock. In addition, AmerisourceBergen’s acquisition of Alliance is another reason to be positive about its 2021 outlook.