2 health stocks that could skyrocket in 2021

Health is a great place to invest right now. Whether you think 2021 will be the last year we are very concerned about COVID-19, or believe that Modern CEO Stephane Bancel is right and that this coronavirus will exist forever (but not as a threat at the level of a pandemic), there is no doubt that there will be a strong demand for quality health services.

I see two health care stocks as having the potential to skyrocket this year for very different reasons. American Well (NYSE: AMWL), or Amwell, could benefit from continued high demand for telehealth services, while AmerisourceBergen (NYSE: ABC) is able to thrive if conditions in the industry begin to return to normal and sales of pharmaceuticals increase.

1. The case of Amwell

Telehealth company Amwell did not begin public operations until September 17. The share has risen by around 30% since then (while the S&P 500 is up 15%), and there may be more to come. With a market cap of $ 7 billion, Amwell is only a fraction of the size of its rival Teladoc Health, which is now worth more than $ 40 billion after its merger with Livongo Health. And the numbers that Amwell has generated have been phenomenal.

When he released his third quarter results on Nov. 12, Amwell reported 1.4 million telehealth visits for the period – a 450% increase year over year. Revenue of $ 62.6 million increased 80%. Although the company suffered a net loss of $ 64.6 million, the poor earnings performance didn’t really hurt Teladoc – it has recorded losses in each of its last five quarters.

And Amwell could accelerate its growth by making it easier for hospitals to offer telehealth services. On February 18, he announced the launch of Hospital TV 100, a device that will allow hospitals to convert televisions they already have into telehealth terminals. These can improve social distancing and safety for healthcare professionals while allowing them to keep tabs on patients.

Even if healthcare professionals are administering COVID-19 vaccines at a fairly rapid rate, it could still be some time before the pandemic is over. And in the meantime, the demand for telehealth services will remain high.

With its smaller size and a focus primarily on telehealth (Teladoc, on the other hand, has grown into other areas, such as chronic disease management), Amwell is more of a pure game in this area than its rival. This could give it more of an opportunity to soar if the demand for telehealth services increases this year.

2. The case of AmerisourceBergen

Some investors may want to hedge their bets with optimism that the spread of COVID-19 may continue to decline sharply, to the point where hospital operations can begin to return to normal. One way to do this would be to invest in the AmerisourceBergen medical distribution company.

Over the past year, patients have not been eager to visit doctors or hospitals for fear of contracting the coronavirus. This has been a headwind for pharmaceutical sales.

In AmerisourceBergen’s third quarter of fiscal 2020, which ended June 30, sales grew only 0.3% year-over-year, in part due to COVID-19; sales had been boosted by consumers stocking up on pharmaceuticals at the start of the pandemic. In its fiscal fourth quarter, sales growth rebounded to 7.9%. And when it released its first quarter of fiscal 2021 results on February 4 (for the last three months of the 2020 calendar), revenue reached $ 52.5 billion and grew at an even higher rate – 9.7%. AmerisourceBergen has also revised its guidance upwards for fiscal 2021. Previously, it forecast growth in the median single-digit percentages. Now he expects growth in the high single-digit percentages.

One reason to be optimistic about its growth prospects: the company is expanding rapidly. Earlier this year, AmerisourceBergen acquired a majority stake in Alliance Healthcare from Alliance of Walgreens boots for $ 6.5 billion. This move will help expand the company’s footprint, particularly in Europe, where Alliance is one of the largest pharmaceutical wholesalers. While Walgreens and AmerisourceBergen work together in a strategic partnership in the United States, and the drugstore retailer owns nearly 30% of AmerisourceBergen, the two companies are focusing on different areas: wholesale or detail.

Over the past 12 months, AmerisourceBergen shares have risen a modest 8%, while the S&P 500 has risen 16%. However, once patient visits reach pre-pandemic levels, pharmaceuticals are expected to experience increased demand. That alone should drive the stock up. In addition, the acquisition of Alliance by AmerisourceBergen is another reason to be optimistic about its prospects in 2021.