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Why American Well Stock Surged on Thursday

What happened

Shares of American Well (NYSE: AMWL) soared on Thursday, climbing as much as 13.3%. As of 2:46 p.m. ET today, the stock was still up 10.9%

The catalyst that sent the telehealth software company higher was bullish commentary courtesy of a Wall Street analyst.

So what

Piper Sandler analyst Sean Wieland raised his price target on American Well (also called Amwell) to $6, up from its previous level of $5. At the same time, the analyst maintained his overweight (buy) rating on the stock. This represents potential upside for investors of roughly 34% compared to the stock’s closing price on Wednesday. 

The analyst cited numerous client wins, including the recent signing of CVS Health (NYSE: CVS), which he sees as “marquee reference customers.” These high-profile contracts validate Amwell’s Converge platform, which could act as a catalyst, generating continued sales momentum for wider platform adoption by other large healthcare systems.

Wieland is more bullish than some of his Wall Street peers, justifying his higher price target with “slightly better growth and profitability assumptions.”

Now what

The analyst has a point. With a market cap of just $1.3 billion, larger healthcare providers might be reluctant to adopt Amwell, compared to more-recognizable names including Teladoc Health. Landing a household name like CVS Health lends a fair degree of credibility to Amwell’s Converge platform.

Wieland isn’t the only analyst who thinks so. Earlier this month, Morgan Stanley analyst Ricky Goldwasser called the CVS deal a “game-changer” and “a meaningful validation of Amwell’s approach.” 

Late last year, the Massachusetts Technology Leadership Council called Converge the “best new application in telehealth,” easily integrating electronic health record capabilities and providing a scalable solution that addresses both digital and physical healthcare visits.

Having CVS on board is just the latest evidence that Amwell’s strategy is beginning to take hold.

Danny Vena has positions in Teladoc Health. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.

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