Undervaluation Thesis for American Well: Net Cash Flow Per Share and Embedded Optionality

American Well (AMWL) has long been a polarizing name in the healthcare technology sector, but a closer examination of its financials and strategic trajectory reveals a compelling undervaluation case. By analyzing net cash flow per share and the embedded optionality from its transformative initiatives, investors can identify a mispriced opportunity in a company poised for margin expansion and revenue diversification.

Net Cash Flow Per Share: A Path to Positive Momentum

American Well's 2024 financials revealed a net cash outflow of $144 million, translating to a net cash flow per share of -$9.35, per the company's 2024 10‑K. However, the first half of 2025 demonstrated marked improvement, with net cash used in operations declining by 63% year-over-year to $29.8 million, or -$1.94 per share, as shown in the company's Q2 2025 earnings. This reduction in cash burn reflects aggressive cost-cutting measures, including a 43% drop in sales and marketing expenses and a 27% reduction in general and administrative costs, as detailed in the same Q2 release.

The company's shift toward high-margin subscription software revenue-up 30% year-over-year in Q1 2025-further supports this trend, according to the Q1 2025 highlights. With adjusted EBITDA losses narrowing to -$4.7 million in Q2 2025, American Well is on track to achieve positive operating cash flow by 2026, per the company's Q2 2025 call. At a current stock price of $6.04 (as of October 2025), the price-to-cash flow ratio for H1 2025 stands at a negative -3.11, but the trajectory of improvement suggests this metric will normalize as cash flow turns positive.

Embedded Optionality: Strategic Catalysts for Growth

American Well's undervaluation is further justified by its embedded optionality, driven by three key initiatives:

1. DHA Contract Expansion: The $180 million Defense Health Agency (DHA) contract to deploy the Converge platform across the Military Health System represents a cornerstone of growth. This sole-source agreement, serving 9.6 million military personnel and their families, is expected to drive subscription revenue and operational efficiency, as discussed on the Q4 2024 call. Despite a Q2 2025 contract extension that excluded behavioral health services due to budget constraints, the core platform deployment remains on track, with enterprise-wide adoption slated for H1 2025.

2. Subscription Revenue Diversification: American Well's pivot to a subscription-based model has accelerated, with software revenue growing 30% year-over-year in Q1 2025. This shift not only improves margins but also creates recurring revenue streams, insulating the company from the volatility of transaction-based models, as noted in a Business Insider article.

3. Platform Innovation and Partnerships: The integration of Vida Health into clinical programs-expanding access to obesity and diabetes care, including GLP-1 therapies-highlights American Well's ability to adapt to market demands, as discussed on the Q4 2024 call. Additionally, the hiring of a former Amazon executive to lead AI and data analytics initiatives underscores the company's commitment to technological differentiation, according to the Q1 2025 highlights.

Valuation and Risk Considerations

At a market cap of $97.56 million, American Well trades at a steep discount to its peers, despite its strategic positioning in the hybrid care market. While the company faces near-term challenges-such as a 22% decline in platform visits in Q2 2025 and customer concentration risks-its cost discipline and revenue diversification efforts mitigate these concerns, as noted in a Q2 2025 report. Analysts project revenue of $335–$350 million in 2025, with adjusted EBITDA breakeven achievable by 2026, according to FierceHealthcare.

Conclusion

American Well's undervaluation stems from its improving cash flow dynamics and the high-impact potential of its strategic initiatives. The DHA contract, subscription growth, and platform innovation create a compelling case for embedded optionality, while the narrowing cash burn and projected margin expansion suggest a path to profitability. For investors willing to navigate near-term volatility, AMWL offers an attractive risk-reward profile in a sector poised for long-term growth.