We see a “much higher” stock price for WELL Health, Stifel says

WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News TSX:WELL) recorded top and bottom line beats in its latest quarterly results, according to Stifel GMP analyst Justin Keywood, who in an April 1 update to clients reiterated his “Buy” rating and $2.60 target price for WELL.

Vancouver-based WELL Health, which operates primary healthcare clinics, has an electronic medical records (EMR) business and provides telehealth services, announced its fourth quarter 2019 financials on Tuesday.

WELL saw its revenue more than triple over the past 12 comparable months, rising to $32.8 million, with an adjusted EBITDA loss for the 2019 year of $1.7 million.

For the fourth quarter, WELL hit $9.8 million in revenue with a net profit of $216,067. WELL ended 2019 with $15.6 million in cash and equivalents and $5 million in debt.

“We had an excellent fourth quarter. We demonstrated growth and strength in both our clinical and digital businesses,” said Hamed Shahbazi, Chairman and CEO, in a press release. “2019 was a momentous year for WELL as we established ourselves as a leader in providing technology enabled healthcare services.”

Since December, WELL has had a number of notable events, including the acquisition of OSCAR provider THT for $7.2 million, the launch of its VirtualClinic+ telemedicine platform, the closing of a $10-million private placement and a $5.94-million investment in Toronto-based telehealth company Insig.

The Insig deal will see WELL acquire a substantial minority equity position in Insig for roughly 2.6 million WELL shares at $1.50 per share, along with a $2-million loan to Insig in exchange for a convertible note.

On the Q4, Keywood said the $9.8 million in revenue beat his $8.7-million estimate as well as the Street’s $9.0-million forecast. The quarterly adjusted EBITDA loss of about $300,000 was a little better than Keywood’s negative $400,000 estimate.

Keywood noted that WELL is expanding aggressively in the essentially two week-old Canadian telehealth market, opened up as a measure to address the COVID-19 crisis. On WELL’s positioning within the new space, Keywood commented, “The adaptability of WELL’s model demonstrates the entrepreneurial savvy at the firm and we expect further innovation.”

As to his investment thesis on WELL, Keywood wrote, “We see WELL as offering an M&A driven high-growth health-tech platform with a solid management team to support shareholder value creation. WELL is anticipated to add several more clinics to its network of 20 while ramping up digital operations and SaaS revenue. This provides a unique business model and competitive advantage, where the network of clinics contributes steady revenue and cash flow but also valuable data with a patient base in place,” Keywood said.

Looking ahead, the analyst is forecasting for fiscal 2020 revenue and EBITDA of $40.2 million and $0.8 million, respectively, and for fiscal 2021 revenue and EBITDA of $49.6 million and $4.5 million, respectively.

At the time of publication, Keywood’s $2.60 target represented a projected one-year return of 73.3 per cent.

“As WELL’s digital operations ramp up with greater scale from more clinics, we forecast significant growth and profit expansion, leading to a much higher stock price. WELL is also building long-term strategic value where its operations could be attractive to potential acquirers. Combined, we see the stock as offering a compelling reward to risk investment case,” Keywood wrote.

Disclosure: Jayson MacLean and Nick Waddell own shares in WELL Health Technologies and the company is an annual sponsor of Cantech.