Digital Health Demand Will Accelerate Converge Platform Adoption

Key Takeaways

• Large government contracts, platform integration, and AI-driven efficiencies are positioning Amwell for long-term margin expansion and recurring software revenue growth.
  
• Shift toward digital-first healthcare and value-based models increases customer stickiness, expanding Amwell's market opportunity beyond traditional industry cycles.
  
• Reliance on government contracts, ongoing losses, intensifying competition, regulatory uncertainties, and shifts to hybrid care threaten growth, margins, and the sustainability of the telehealth model.

Catalysts

An enterprise platform and software company, delivers digitally enabling hybrid care in the United States and internationally.

• Analyst consensus sees the Military Health System contract boosting subscription revenue, but this extension could be a launching pad for rapid multiyear renewals and swift program expansions within the federal sector, accelerating Amwell's transformation into an indispensable platform with durable, high-margin government revenue streams and sticky, long-term earnings growth.
  
• While analysts expect improvement from the divestiture of non-core units, there is further upside as management's aggressive cost realignment and operational focus drive a meaningfully leaner expense base, which combined with higher-quality SaaS contracts, could unlock an even faster-than-expected shift to profitability and margin expansion.
  
• Amwell is uniquely positioned to capture surging demand for digital-first healthcare as widespread consumer comfort with virtual care and the normalization of remote care models signal a permanent uplift in usage, supporting sustained double-digit revenue growth far beyond typical industry cycles.
  
• With the continued evolution toward value-based care and deeper payer/provider integration, Amwell's scalable, interoperable Converge platform stands to become critical infrastructure for large health systems seeking cost reduction and population health management, intensifying client stickiness and expanding the company's total addressable market well beyond current analyst estimates.
  
• Accelerated AI integration and proprietary data analytics across Amwell's platform promise step-change gains in operational efficiency and care outcomes, improving customer retention, enabling premium pricing, and positioning the company as the preferred partner in the ongoing digitalization of healthcare, driving material long-term operating leverage and recurring software revenue uplift.

American Well Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on American Well compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming American Well's revenue will grow by 5.6% annually over the next 3 years.
• Even the bullish 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 $27.8 million (and earnings per share of $1.46) by about August 2028, up from $-124.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 10.3x 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 57.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.94%, as per the Simply Wall St company report.

American Well Future Earnings Per Share Growth

Risks

• The exclusion of behavioral health and automated care programs from the Military Health System contract extension due to broad Department of Defense budget cuts highlights American Well's exposure to government funding cycles and contract unpredictability, risking recurring revenue stability and future top-line growth.
  
• The company continues to generate operating losses and negative adjusted EBITDA, with persistent cash burn making the path to consistent profitability uncertain and raising the possibility of dilutive equity raises to maintain liquidity if top-line growth falters.
  
• American Well faces intensifying competition from larger, integrated healthcare and telehealth players such as Teladoc, CVS Health, and UnitedHealth, as well as direct efforts from hospital systems to develop their own telehealth offerings, all of which threaten pricing power and could suppress future revenue and earnings expansion.
  
• Growing regulatory and reimbursement uncertainty-especially potential changes in coverage criteria for virtual care and stricter data privacy or cybersecurity requirements-could increase compliance costs and compress net margins, directly impacting the company's bottom line.
  
• With patient and provider interest increasingly shifting toward hybrid (in-person plus virtual) care models and industry commoditization of basic virtual visits, American Well's pure-play telehealth offerings risk declining demand and margin pressure, threatening both revenue growth and the company's ability to differentiate itself in a crowded market.

Valuation

• The assumed bullish price target for American Well is $12.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of American Well's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 bullish analysts, you'd need to believe that by 2028, revenues will be $317.4 million, earnings will come to $27.8 million, and it would be trading on a PE ratio of 10.3x, assuming you use a discount rate of 7.9%.
• Given the current share price of $7.15, the bullish analyst price target of $12.0 is 40.4% 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.