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Could This Upcoming IPO Be the Next Teladoc?

By David Jagielski - Jun 26, 2020 at 11:01AM

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Teladoc's been one of the hottest stocks on the markets this year, and it's already more than doubled in value.

It's always a lot more enticing to get in on an investment sooner rather than later -- buy early, and your long-term returns could be far greater. Teladoc Health (TDOC 6.72%) is an example of a stock that's been dominating the markets for years, and it's already up more than 130% in 2020. The S&P 500, by comparison, is still down 6% year to date.

But while the virtual health services provider is certainly an attractive investment, its shares have gotten a lot pricier. With the stock doing as well as it has this year, it's now trading at 24 times its revenue and more than 15 times its book value. And that's why instead of buying Teladoc, investors may want to consider investing in an upcoming IPO that could enjoy similar success: Amwell.

Telehealth company looks to go public this year

Amwell also provides telehealth services, and the company filed an IPO in early June. Its shares could be available on the markets as early as September.

The COVID-19 pandemic has caused a recession in the economy, but it's also put a spotlight on healthcare stocks like Teladoc that can change the industry and make it more mobile. That's why 2020 could be an optimal time for Amwell to go public, as telehealth services are in high demand.

Stethoscope and pen on a laptop.

Image source: Getty Images.

COVID-19 leading to a spike in growth for Amwell

The Massachusetts-based company, like Teladoc, gives patients the ability to connect with a physician using their phones and through virtual visits. And since the outbreak of COVID-19, Amwell's been seeing demand for its services soar.

Prior to the pandemic, the company said it was averaging 5,000 virtual visits per day. Now, it's averaging between 45,000 to 50,000. Co-CEO Ido Schoenberg noted that "we have clients that had 2% to 3% of their patient volume online that now have 75% of visits online."

Amwell's also seeing growth in the number of providers using its services, with Schoenberg stating that "the number of active providers on our platform grew seven times over in two months."

Could Amwell do as well as Teladoc?

Amwell provides similar services to Teladoc, and that's why it may not be surprising if it's able to mimic the success that the popular New York-based company's enjoyed this year. For a visit to an online doctor, patients pay Amwell $79 if they don't have insurance. Teladoc's price for uninsured patients is $75.

Currently, Amwell says that through its network of health systems, hospitals, employers, and health plan partners, it provides services for 150 million people.

Teladoc states that it has 43 million members and over 12,000 clients (organizations) that it services. However, it's unclear how many people it serves in total to compare against Amwell's figures. Until Amwell releases its prospectus, which will come before the IPO, it'll be difficult to discern exactly how it stacks up against Teladoc. But given the rising popularity of telehealth and virtual care, it's likely that Amwell will be a popular new issue when it becomes available.

Whether Amwell will do as well as Teladoc will depend on its sales growth and how it does against its rival. When Teladoc released its first-quarter results on April 29, the company continued to show terrific year-over-year revenue growth of 41%. Although profits remain elusive for the public company, investors are excited with the healthcare stock's growth and the potential that it has over the long term. 

An IPO worth watching

Amwell could enjoy similar success to Teladoc, and that's why it has the potential to be one of the hot IPOs of 2020. Teladoc's made early investors who bought its IPO in 2015 very rich:

TDOC Chart

TDOC data by YCharts

While there's no guarantee that Amwell will follow the same path, it's an intriguing opportunity given the growth potential that telehealth and virtual care services are showing amid this pandemic.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Teladoc Health. The Motley Fool has a disclosure policy.

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