Last Update 11 Dec 25

AMWL: Cost Discipline And 2026 Cash Flow Breakeven Will Drive Future Upside

Analysts have trimmed their price target on American Well, cutting it by $3 to $7 per share, as they balance the positive surprise in Q3 adjusted EBITDA and reaffirmed 2026 cash flow breakeven goals against slightly more conservative assumptions for the discount rate, revenue growth, and future valuation multiples.

Analyst Commentary

Bullish Takeaways

Bullish analysts highlight the Q3 adjusted EBITDA beat as evidence that cost reduction initiatives are gaining traction faster than previously modeled, supporting a path to improved profitability.
The reiterated 2026 cash flow breakeven target is viewed as a key milestone that, if met, could warrant higher valuation multiples over time.
Stronger than expected margin execution in the quarter suggests management is capable of balancing growth investments with disciplined expense control.
Some bullish analysts see the lower price target as a recalibration to current market conditions rather than a change in the long term thesis on the business model.

Bearish Takeaways

Bearish analysts remain cautious on the companys revenue growth trajectory, trimming expectations to reflect a more competitive and slower spending environment for digital health solutions.
More conservative assumptions around discount rates and future valuation multiples indicate concern that higher for longer interest rates could cap upside for the shares.
There is skepticism about the companys ability to consistently deliver against its multi year cash flow targets, with execution risk still seen as elevated.
The reduced price target underscores lingering doubts that cost efficiencies alone will be sufficient to drive sustained multiple expansion without clearer evidence of durable top line acceleration.

What's in the News

Issued new fourth quarter 2025 revenue guidance, targeting a range of $51 million to $54 million, signaling expectations for continued growth exiting the year (company guidance)
Lowered full year 2025 revenue outlook to $245 million to $248 million from a prior range of $245 million to $250 million, reflecting a slightly more cautious stance on near term demand (company guidance)
Maintained overall 2025 revenue framework despite the narrowed range, suggesting management views the adjustment as fine tuning rather than a fundamental shift in trajectory (company guidance)

Valuation Changes

Fair Value: Unchanged at 8.13x, indicating no revision to the intrinsic value estimate despite other model adjustments.
Discount Rate: Risen slightly from 8.38 percent to approximately 8.42 percent, reflecting a modest increase in perceived risk or funding costs.
Revenue Growth: Fallen slightly, with the long term growth assumption reduced from about negative 2.00 percent to roughly negative 2.07 percent.
Net Profit Margin: Effectively unchanged at around 7.11 percent, suggesting stable long term profitability expectations.
Future P/E: Risen marginally from about 10.51x to approximately 10.54x, signaling a slightly higher assumed valuation multiple on future earnings.

Integrated AI, expanded service offerings, and deepening relationships with major clients are driving strong recurring revenue growth and positioning for future upselling.
Ongoing cost reductions and a shift to higher-margin software are improving profitability, supporting a credible path toward sustained positive cash flow.
Revenue predictability is challenged by declining visit volumes, volatile contract renewals, reliance on non-recurring revenue, ongoing losses, and heightened competitive and macro risks.

Catalysts

About American Well

An enterprise platform and software company, delivers digitally enabling hybrid care in the United States and internationally.What are the underlying business or industry changes driving this perspective?

The ongoing transition of healthcare systems toward more accessible, technology-enabled care is driving increased adoption of digital platforms; management cited expanding deployments (e.g., Military Health System, Florida Blue), underlining a robust pipeline and positioning Amwell for sustained revenue growth as virtual care becomes mainstream.
The significant integration of AI capabilities across Amwell's platform-including automation, clinical decision support, and data analytics-aligns with rising demand for more efficient, data-driven value-based care, supporting improved gross margins and accelerating the path to profitability.
Deepening relationships and contract extensions with large, long-term clients like the Department of Defense (Military Health System) and Florida Blue not only support predictable recurring revenues but also create a foundation for future expansion and upselling of higher-margin services, boosting both revenue and net margins.
Amwell's focus on expanding its digital health service offerings, along with the platform's capability for rapid deployment of additional programs (such as behavioral health and chronic disease management), increases the company's addressable market and provides upside for both revenue and earnings as clients normalize budgets and add new services.
A concerted effort to streamline operations, reduce operating costs, and shift revenue mix toward higher-margin subscription software is resulting in improved adjusted EBITDA and a credible path to positive operating cash flow by 2026, pointing to long-term net margin and earnings potential.

American Well Earnings and Revenue Growth

American Well Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming American Well's revenue will neither grow nor shrink over the next 3 years.
Analysts are not forecasting that American Well will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate American Well's profit margin will increase from -46.2% to the average US Healthcare Services industry of 8.8% in 3 years.
If American Well's profit margin were to converge on the industry average, you could expect earnings to reach $23.6 million (and earnings per share of $1.31) by about September 2028, up from $-124.5 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.1x on those 2028 earnings, up from -0.9x today. This future PE is lower than the current PE for the US Healthcare Services industry at 54.8x.
Analysts expect the number of shares outstanding to grow by 5.43% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.95%, as per the Simply Wall St company report.

American Well Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The one-year renewal of the Military Health System (DHA) contract (rather than a multi-year agreement) and the exclusion of behavioral health and automated care programs due to Department of Defense budget cuts introduce heightened revenue concentration risk and create uncertainty about the stability and duration of high-margin government contract revenues, which can affect revenue predictability and overall top-line growth.
Sustained decline in total visit volumes (down 22.3% year-over-year for Q2) and significant declines in Amwell Medical Group (AMG) visit revenue (down 20.8% year-over-year), when combined with a flattish outlook post-normalization, suggest longer-term challenges in maintaining user engagement and utilization rates, potentially suppressing revenue per visit and limiting EPS growth.
Heavy reliance on non-recurring subscription software revenue (due to the timing of customer go-lives and initial deployments, especially with the Military Health System) results in top-line volatility and questions around the sustainability and scalability of recurring, high-margin revenue-directly impacting future revenue growth and net margins.
While cost reductions in R&D, sales and marketing, and G&A have favorably improved adjusted EBITDA and delayed cash burn, the business is still operating at a loss and is targeting breakeven only by 2026; continued net losses and negative operating cash flow may necessitate further capital raises, leading to dilution risk for shareholders and ongoing pressure on net income.
Macro uncertainty (regulatory changes, provider and payer budget constraints), increased competitive pressure from both large incumbents and new digital health entrants, and possible pricing pressure from growing market consolidation all threaten Amwell's ability to win, renew, or expand major contracts, which could compress margins and lower EBITDA in the long term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $9.5 for American Well based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.0, and the most bearish reporting a price target of just $7.5.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $269.8 million, earnings will come to $23.6 million, and it would be trading on a PE ratio of 9.1x, assuming you use a discount rate of 8.0%.
Given the current share price of $6.96, the analyst price target of $9.5 is 26.7% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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