WELL Health gets new street-high $3.50 target from Echelon Wealth

Results he describes as “strong” have Echelon Wealth Partners analyst Rob Goff raising his price target on WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News TSX:WELL).

On May 15, WELL reported its Q1, 2020 results. The company lost $2.01-million on revenue of $10.23-million, a topline that was up 38 per cent over the same period last year.

“First quarter 2020 was an eventful quarter for Well as we started the quarter by graduating from the TSX Venture to the main board of the TSX Exchange, we launched our VirtualClinic+ telehealth service and we witnessed the outbreak of the COVID-19 pandemic,” CEO Hamed Shahbazi said. “While the COVID-19 pandemic has introduced much uncertainty and disruption to most industries, we feel enormously fortunate and grateful to be in a position where we are fully empowered to assist health care workers carry out their business continuity programs and support the important work that they do, regardless as to whether or not the care they are providing is carried out on site at a clinic or virtually through our telehealth program. All our clinics have remained open throughout the pandemic and continue to provide much needed health care services during these trying times, while our VirtualClinic+ has allowed patients and physicians observing social distancing rules to seamlessly conduct virtual medical consultations for all kinds of critical and non-critical medical visits. In addition, our digital EMR business continued to grow and exhibit the rock-solid SaaS revenue and resiliency that we have come to observe with this business segment.”

Goff says that although there are several parts to the WELL Health story, most everyone was focused on one aspect.

“The highlight of the quarter was clearly the early success of physician and patient adoption of telehealth. WELL indicated that it is currently exceeding 1,000 patient sessions on a daily basis with ~800 physicians onboard. The Company also indicated that it believes its direct VirtualClinic+ traffic along with that associated with Insig put it amongst the leaders nationally. For reference, we note that getMaple.com recently indicated that it was at an annualized revenue run-rate of ~$20+M ahead six-fold y/y. With our recent initiation, we ascribed a value equivalent to $50M or $0.40 per WELL share associated with telehealth. We worked from a top down approach looking at a scenario with 15% adoption and a 5-10% market share could generate in excess of $140-290M in revenues to WELL before physician payouts (est. ~70%) or $42-87M of gross profit. We noted the potential for broader adoption of specific and more aggressive valuations. With WELL’s release, we are moving to adopt a bottom-up approach supporting a $0.90/shr value for telehealth.”

In a research update to clients today. Goff maintained his “Buy” rating on WELL Health, but raised his one-year price target on the stock from $2.75 to $3.50, implying a return of 18.2 per cent at the time of publication.

The analyst thinks WELL will post Adjusted EBITDA of negative $1.0-million on revenue of $42.2-million in fiscal 2020. He expects those numbers will improve to EBITDA of positive $2.8-million on a topline of $58.5-million the following year.

“Strong results speak to both execution strength and merits of WELL’s integrated model where the growth of telehealth visits offset in-clinic volume declines,” the analyst added. “Investor and regulatory support along with patient demand and physician adoption have clearly advanced the nascent telehealth market at least by three years. We anticipate inevitable short-term disappointments as the sector tracks along S-curves for each constituency; however, we believe the advances have irreversibly fast-forwarded the space.”

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