By Michael Elkins
Piper Sandler downgraded American Well Corp. (NYSE:AMWL) to a Neutral rating (From Overweight) and cut the price target on the stock to $3.50 (From $5.00) after the company reported a sequential decline in 4Q22 subscription revenue and issued "tepid" FY23E guidance on 2/22/23.
AMWL reported 4Q22 revenues of $79.2M, up 9% y/y and ahead of consensus estimates of $78.0M. Subscription revenue declined (4%) sequentially to $30.7M. R&D expense declined sequentially to $27.7M but was accompanied by $10.2M of capitalized software development cost. Including capitalized software development costs, R&D spending was essentially flat vs. 3Q22. 4Q adjusted EBITDA was ($43.4M).
Piper Sandler analysts wrote in a note, "AMWL reported a sequential decline in 4Q22 subscription revenue and issued tepid FY23E guidance on 2/22/23. Early adopters seem to appreciate the enhanced functionality of Converge and we believe the new platform will protect AMWL's long term competitive positioning. Over the next 12 months, however, we believe the Converge rollout will elongate sales cycles and elevate churn risk. The FY23 outlook implies 1% y/y revenue growth at the midpoint. The company expects growth to inflect in FY24, but noted that macro factors could push out adjusted EBITDA profitability past FY25. We believe AMWL is executing well, but we do not think this momentum will hit the P&L in FY23. With a lack of near-term catalysts, we downgrade AMWL to Neutral. We pare back the multi-year growth assumptions in our DCF and reduce our PT from $5.00 to $3.50."
Shares of AMWL are down 3.79% near mid-day trading on Monday.