Good morning. National Vision's ($EYE) 1Q21 results and guide look good, Amwell ($AMWL) not so much, and One Medical ($ONEM) looks like it's going to be a tough stock today. See below for updates and some interesting articles we're reading, and please keep an eye out for longer notes on our core ideas. If you have questions/feedback on anything, you can always reach us at HealthCareTeam@Hedgeye.com.
Hedgeye Health Care Position Monitor
Position Monitor & Watchlist Company uPdates
National Vision (EYE) remains one of out Best Ideas on the long side. Earnings and guidance look great in absolute terms and relative to our expectations. Very clear beat and raise on strong momentum that management said "continued throughout April." Tom presented EYE on The Pitch back on April 20th, and we highlighted the momentum we saw heading into the print on 4/21: "Evidence suggests pent-up demand is real, data sets say acceleration, and forecast algo says accelerating. That 2022 sales number - we think that’s where to focus as we get toward the middle of the year - get toward $2.4 billion = a stock well into the high $50s or $60s.near-term. We use the top line because that’s the best correlation to the stock price, in our opinion (vs. EPS or EBITDA)."
The machine learning algo was very accurate for both of EYE's key brands (America's Best and Eyeglass World), and we know it'll only get better as we feed it more data. We'll be on the call at 10:00 AM listening for color on store openings, April trends, comps, and labor.
One Medical (ONEM) remains one of out Best Ideas on the long side as well. It will likely be a blemish on our record this week, unless the stock reverses course (it's down ~10% premarket, which is overly punitive given a base of 598k members to grow from). There was more COVID testing that fell off, and they didn't break the data out, which is frustrating. ONEM was doing COVID testing and some vaccinations, and we thought there would be a better handoff. We think 2Q21 will be the low for the comp - guidance is just above consensus at the top end of the range, and the lower end is lower than we'd like to see. Our trackers and model suggest a beat is coming for 2Q21, and we like the profitability on the care margin line. The new deal with Baylor Scott & White in TX is further evidence of the model's strength, and we expect ONEM's footprint to expand further (i.e., store count and capex will rise). Overall, it's a very good long tail idea as the hybrid care model takes hold.
Amwell (AMWL) remains on our Short list and didn't disappoint. AMWL missed the top line and reiterated guidance. Questions we’ve been raising about the client base and churn have been validated. We'll have a more detailed note out later this morning, but one more point for now: We aren't sure that AMWL's Converge concept will work. Inviting developers in, creating an app marketplace, etc. may not be what the majority of health systems really want (or need). It sounds slow, difficult, and not in-line with how telehealth is being baked into other health systems’ operations or strategies. The stock has reached out initial target range, so we're working on where it can go "from here."
NeoGenomics ($NEO) presented at BofA yesterday and sounded very confident. Management provided some helpful color on the InVision and RaDaR opportunities (liquid biopsy and MRD). The pharma growth opportunity is very real. $200MM shouldn't be viewed as a backlog - those are signed contracts and it's a "very full funnel," per new CEO Mark Mallon, and it sounds like the combination of core NEO (serving community oncologists), Inivata, and Trapelo will be a pretty powerful, synergistic beast that helps community oncologists adapt and leverage NGS, liquid biopsies, etc. Time will tell.
Teladoc ($TDOC) remains on our Long Bias List (i.e., the bench). Yesterday, Teladoc’s CEO Made His Case. The Beaten-Down Stock Responded.- We're not sure anything matters other than Livongo sell-through; however, Gorevic downplayed the Amazon threat near-term and risk that telehealth reverts to pre-COVID levels.
MultiPlan ($MPLN) isn't high on our radar, but we're curious to see how the stock reacts to a slight beat and raise. The former SPAC (Churchill Capital) is likely one of the reasons we get asked about $FAII dropping from $10 to $8 regularly. There are simple and complex trading strategies around SPACs. This one had hair on it from the beginning, and the stock dropped to a low point of right around $5.50. Today, however, they reported what appear to be "OK" results - a couple million above the consensus range - and raised guidance a bit for FY21 (many companies would love to have $750MM+ of adj. EBITDA for the year and ~$400MM of cash flow from ops). It wasn't a blowout, and we'll have to see if it matters.
Other News/Quick Links
Nursing in 2021: Retaining the healthcare workforce when we need it most - Another staffing update, also + for $AMN, frustrating overall (nobody likes to see our most important health care workers burning out - see below for the reasons): "Twenty-two percent: That’s how many nurses indicated in a recent McKinsey survey that they may leave their current position providing direct patient care within the next year. At a time when nurses are most needed, a significant strain in the workforce exists due to the COVID-19 pandemic. Health systems and other employers of nurses recognize this challenge and are actively designing and deploying new strategies."
Diabetes tech companies continue 2020's success with Q1 growth. Investors seem unimpressed. We were asked about $DXCM during Monday's House Call. The article is a good, quick summary of what's going on, but it could be as simple as "good results aren't good enough" when multiples are mid-teens times forward sales (well, they were - forward EV/Sales are lower now - DXCM is ~11x, for example): "All three companies - DXCM, TNDM, PODD - raised 2021 guidance due to outperforming internal expectations in the quarter, while Wall Street analysts were in agreement that the diabetes tech space met, and in some instances beat, projections for the quarter."
Where COEs fit into the healthcare puzzle - Centers of Excellence (COEs) are an important piece of the puzzle in the push toward value-based care replacing FFS: "When only one-fifth of employees leveraged a COE offering, employers saved almost 10%, while employees saved more than $2,000 by not having deductibles or other costs, according to Rand data. If a majority of employees use the COE program, employer savings can reach in excess of 45%. COEs also reduced unnecessary surgery, redirecting 30% of patients to less invasive treatments, and reduced readmissions — another key quality metric — by as much as 86% relative to the national average."
MICROQUADS* & BACKTESTS
As a reminder, if you have questions about the MicroQuad process, please try to find ~20 minutes to watch our Dec 30, 2020 call replay: Process & Utility of the Hedgeye Health Care #MicroQuads - CLICK HERE for event details (includes video link and materials link).
Noteworthy changes: EXAS to MQ1, NEO moving around on its way to MQ2, ONEM rotating as well, just shy of MQ1.
Calendars
All data available upon request. Please reach out to HealthCareTeam@Hedgeye.com with any feedback or inquiries.
Have a great day out there!
Thomas Tobin
Managing Director
203-562-6500 x145
ttobin@hedgeye.com
Twitter
LinkedIn
Justin Venneri
Director, Primary Research
203-562-6500 x127
jvenneri@hedgeye.com
Twitter
LinkedIn
William McMahon
Analyst
203-562-6500 x145
wmcmahon@hedgeye.com
Twitter
LinkedIn
*Please note, not all Position Monitor names make it into the MicroQuad output - most likely due to a lack of sufficient historical trading and estimate data.