WELL Health wins street-high $9.50 price target at Desjardins

Analyst David Newman of Desjardins believes that WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News TSX:WELL) could be reaching an inflection point with new deals, two new business segments and a product launch all in the works.

In an update to clients on Thursday, Newman reiterated his “Buy” rating while raising his target price from $7.00 to $9.50, which at press time represented a projected 12-month return of 52 per cent.

WELL Health is an omni-channel digital health company which currently owns 20 primary healthcare clinics, has Canada’s third-largest electronic medical records (EMR) business serving over 2,000 clinics and has a national telehealth platform in VirtualClinic+, launched earlier this year. The stock has performed well in both 2019 and so far in 2020, gaining 320 per cent in value year-to-date.

Desjardins hosted a virtual non-deal roadshow with WELL CEO Hamed Shahbazi on Thursday and came away with a more bullish take.

“While we plan to publish a deeper dive in the coming weeks, we believe WELL could be at an inflection point in its growth trajectory, driven by: (1) over ten potential deals (LOIs) that could lead to a step-change in run-rate revenue to C $100m by 1Q21, two years ahead of our forecast; (2) the addition of new allied health and billing/back-office segments; and (3) the launch of its pioneering app exchange,” Newman wrote.

On the LOI’s, Newman said they include three EMR deals, other digital deals and healthcare clinics in Eastern Canada, potentially Ontario and Quebec. The analyst said WELL’s more than $35 million in cash should self-fund the majority of its LOI’s, which could together put the company’s 2021 revenue well beyond $100 million (and thus above Newman’s own projection of $70 million).

On the new business segments, Newman said WELL plans to add allied health and billing/back office as a service (BaaS), with the former potentially boosting the company’s margins while the BaaS “addresses the demand of independent practitioners who have not invested in back-office systems,” Newman said.

Lastly, Newman said WELL Health will be launching in a few weeks a “first-of-its-kind” app exchange, apps.health, aimed at enabling third-party developers to offer their software and services alongside WELL’s SaaS-based products. The Desjardins analyst said the exchange would create an ecosystem of digital healthcare solutions, with WELL’s revenue share being about 30 per cent from third-party apps, 50 per cent from apps developed by platforms in which it has a direct investment or ownership and 100 per cent of revenue from its internally developed apps. Newman said the exchange could also serve as an acquisition funnel to acquire successful third-party digital apps.

Looking ahead, Newman said potential catalysts lie in adoption of healthcare technology (with a COVID-19 catalyst), expansion into the US and future acquisitions.

Currently, Newman is forecasting WELL to generate fiscal 2020 revenue and adjusted EBITDA of $43.1 million and negative $1.4 million, respectively, and fiscal 2021 revenue and adjusted EBITDA of $69.6 million and $3.2 million, respectively.

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