Desjardins analyst David Newman sees upside to Dialogue Health Technologies (Dialogue Health Technologies Stock Quote, Chart, News, Analysts, Financials TSX:CARE), maintaining a “Buy” rating and target price of $14.50/share for a projected return of 84.2 per cent in an update to clients on Wednesday.
Founded in 2016 and headquartered in Montreal, Dialogue Health offers a digital healthcare and wellness platform to over 2,000 customers in Canada and Germany, including on-demand access to medical care through its Integrated Health Platform hub focused on physical, mental and wellness, as well as EAP and OHS services.
Newman’s latest note comes after financial services and insurance company Sun Life announced a $48.3 million share purchase in the company at $8/share, giving Sun Life 23 per cent ownership of the company.
Newman views the move as a positive development for Dialogue.
“While the market was concerned by CloudMD’s recent acquisition of MindBeacon for its iCBT program, and CloudMD’s recent agreement with Sun Life for its Mental Health Coach (more of an administrative service), CARE’s opportunity to layer on other services beyond primary care through Lumino at Sun Life remains significant,” Newman said. “We believe this could include CARE’s mental health (MH) offering (e.g. recently launched iCBT program) and EAP through its Integrated Health Platform (IHP).”
The additional investment follows the formation of a strategic partnership that began in May 2020 that saw Sun Life make an initial $32.7 million equity investment in Dialogue, with which Dialogue built and launched the white-label Lumino Health Virtual Care app, with the potential to reach Sun Life’s approximately 3.5 million group plan and individual members.
“Today’s announcement reflects our continued belief in innovative and digital solutions to support the health care needs of Canadians,” said Dave Jones, President of Sun Life Health, a new business unit combining Sun Life’s group benefits business with Lumino Health to focus on mental health support, in a December 1 press release. “Our Clients are looking for digital tools to support them on their health journeys. Lumino Health Virtual Care, powered by Dialogue, is one of the ways Sun Life Health is empowering Canadians to take charge of their health.”
The purchase, which accounts for 9.18 per cent of Dialogue’s overall shares, makes Sun Life the company’s largest shareholder and with a seat on Dialogue’s board, though Newman noted management’s take that the move does not impact the company’s overall independence, governance, operations, strategic direction or management, with the company continuing to focus on executing its growth strategy.
“Officially, Sun Life stated that the shares were acquired for investment purposes. Hence, we do not view it as the beginning of a creeping takeover,” Newman said. “Sun Life sees good value in the current share price level given CARE’s strategic direction.”
Overall, Dialogue Health’s stock price is down 48.7 per cent since it began trading on the Toronto Stock Exchange on March 30, though its value has increased by 7.3 per cent since dropping to a low point of $5.85/share on November 1.
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