When a stock goes public, there's often a flurry of investors rushing out to buy its shares. But even if you place an order, odds are you won't get it for the price you hoped you would. However, with many IPOs struggling after the initial hype, you can sometimes get their shares at lower prices later on, if you're patient enough.
American Well (AMWL 0.78%) and Robinhood Markets (HOOD) are a couple of stocks that jumped in their early trading days but have fallen hard of late. They're both trading below the prices they opened at on their first day, but are they worth adding to your portfolio today?
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1. American Well
American Well, better known as Amwell, is a telehealth stock that went public in September 2020 at an opening price of $25.51. Even Alphabet-owned Google invested $100 million in the promising company. Shares of Amwell would end up rallying to more than $41 a few weeks later in October. But the rally didn't last, and investors who bought then likely cringe at the sight of the stock price today, well below $5 per share.
It's not hard to find reasons to be down on the stock: Amwell isn't generating much growth and its losses over the trailing 12 months topped $179 million. It has also burned through $121 million in cash just from its day-to-day activities. Its total visits for the period ending Sept. 30, 2021 totaled 1.4 million and were up a modest 8% from 1.3 million that it reported in the previous quarter. However, with strong competition from Teladoc and MDLive (which Cigna owns), AmWell's future growth prospects are questionable.
But all hope isn't gone for investors. The company is pivoting toward being a provider of digital care delivery, which means it will rely less on telehealth visits for revenue growth. Its new Converge platform combines multiple health apps in one place for patients, with Amwell stating that it is "designed to serve the full care spectrum across physical, virtual and automated modalities." Health systems, companies offering health plans, and innovators designing products pay subscriptions for access to Amwell's platform, enabling them to offer telehealth solutions to their patients and members. But the proof will be in the numbers. Last quarter, Amwell's revenue of $62 million was flat from the prior-year period, and sales from its platform subscription totaled $26.7 million, rising by a modest 3.5% year over year.
Amwell could be a promising healthcare stock to own this year, but investors might want to wait until it releases its latest numbers (which may not be until late March) to see just how well the adoption of its platform is going.
2. Robinhood
Robinhood is a newer stock than Amwell; it went public in July of last year. Its opening price of $38 would end up doubling and hitting a high of $85 on Aug. 4, 2021. But as with Amwell, the hype and excitement died down, and today, shares of Robinhood are around $12.
The fintech company offers commission-free trading and the app has been popular with new investors, getting them excited about stocks. Unsurprisingly, the hype of cryptocurrencies has played a big part in that, too. The company said for the period ending Sept. 30, 2021, transactions related to Dogecoin (DOGE 5.74%) accounted for 40% of all of its crypto transactions. And that was down from 62% a quarter earlier. While Robinhood's stock has suffered more significant losses than the digital currency over the past several months, the two have largely moved in similar directions, as this chart shows.
HOOD data by YCharts.
It also doesn't help that in 2021, the company reported a net loss of $3.7 billion -- more than double the $1.8 billion in revenue that it generated. During that time, the company spent just under $1.4 billion on general and administrative expenses (75% of revenue) and over $1.2 billion on technology and development (68% of revenue). With expenses that high, there's little chance for the company to turn a profit anytime soon.
The positive is that Robinhood says it is developing more products to help drive growth, such as crypto wallets, which it hopes to officially launch in the first quarter of 2022. In October 2021, management said more than a million people were on the waiting list for its crypto wallet. Robinhood also reported that its monthly active users as of December 2021 totaled 17.3 million, rising 48% from the month a year earlier. That growth has helped fuel the company's 89% year-over-year increase in revenue.
There are some promising growth opportunities with Robinhood, particularly if you're a fan of cryptocurrencies -- especially Dogecoin. But the risks might be too significant to take a chance on the stock. With such massive overhead weighing down its financials, the company is in rough shape. While it is growing its operations and user base, that may not be enough to keep investors happy as it may be a long time before Robinhood gets out of the red, if at all. And with the stock initially down more than 10% in after-hours trading after the release its fourth-quarter results on Thursday, it's clear that investors share those concerns.
