Health is a great place to invest now. If you believe that 2021 will be the last year that we are worrying a lot about COVID-19, or do you believe that Modern CEO Stephane Bancel is right and that this coronavirus will exist forever (although not as a pandemic threat), there is no doubt that there will be a strong demand for quality health services.
I see two health sector stocks with the potential to fire this year for very different reasons. American Well (NYSE: AMWL), or Amwell, could benefit from the continued high demand for telehealth services, while AmerisourceBergen (NYSE: ABC) it is positioned to thrive if conditions in the sector start to return to normal and there is an increase in sales of pharmaceutical products.
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1. The case for Amwell
The telehealth company Amwell did not start public trading until September 17. Shares have risen about 30% since then (while the S&P 500 is up to 15%), and there may be more gains to come. With a market capitalization of $ 7 billion, Amwell is only a fraction of the size of its rival Teladoc Health, which is now worth more than $ 40 billion after its merger with Livongo Health. And the numbers that Amwell has generated have been phenomenal.
When Amwell released its third quarter results on November 12, it reported 1.4 million telehealth visits in the period – an increase of 450% year over year. Revenues of $ 62.6 million increased 80%. Although the company incurred a net loss of $ 64.6 million, the poor performance of its financial results did not exactly affect Teladoc – it recorded losses in each of the past five quarters.
And Amwell could accelerate its growth by making it easier for hospitals to offer telehealth services. On February 18, it announced the launch of Hospital TV 100, a device that will allow hospitals to convert televisions they already have into telehealth terminals. This can increase social distance and security for healthcare professionals, while making it easier for them to control patients.
Even though healthcare professionals are administering the COVID-19 vaccines at a fairly rapid pace, it may still be some time before the pandemic ends. Meanwhile, demand for telehealth services will remain high.
With its smaller size and focus mainly on telehealth (Teladoc, on the other hand, has been expanding into other areas, such as chronic disease management), Amwell is more pure entertainment in this area than its rival. This could give her one more opportunity to skyrocket if demand for telehealth services intensifies this year.
2. The case of AmerisourceBergen
Some investors may wish to protect their bets with optimism for the possibility that the COVID-19 spread will continue to drop dramatically, to the point where hospital operations begin to return to normal. One way to do this would be to invest in the drug distributor AmerisourceBergen.
Last year, patients were not anxious to visit doctors or hospitals for fear of contracting the coronavirus. This has been an obstacle to sales of pharmaceutical products.
In AmerisourceBergen’s third fiscal quarter of 2020, which ended on June 30, sales increased by just 0.3% year on year, due in part to COVID-19; sales increased as consumers stocked up on pharmaceuticals during the early stage of the pandemic. In the fourth fiscal quarter, sales growth returned to 7.9%. And when it released its fiscal results for the first quarter of 2021 on February 4 (for the final three months of the 2020 calendar), revenues reached $ 52.5 billion and were growing at an even higher rate – 9.7%. AmerisourceBergen also updated its guidance for fiscal year 2021. Previously, it predicted that growth would be on average single digit percentages. Now, it expects growth in high single-digit percentages.
One reason to be optimistic about your growth prospects – the company is expanding. Earlier this year, AmerisourceBergen acquired most of Alliance Healthcare from Walgreens Boots Alliance for $ 6.5 billion. The move will help expand the company’s presence, especially in Europe, where Alliance is among the largest wholesalers of pharmaceutical products. While Walgreens and AmerisourceBergen work together in a strategic partnership in the United States and the pharmaceutical retailer owns about 30% of AmerisourceBergen, the two companies focus on different areas: wholesale vs. retail.
In the past 12 months, AmerisourceBergen’s shares have risen a modest 8%, while the S&P 500 has risen 16%. However, when patient visits reach pre-pandemic levels, pharmaceutical products are expected to be in greater demand. This alone should increase the stock. In addition, the acquisition of Alliance by AmerisourceBergen is another reason to be optimistic about its prospects in 2021.