WELL Health keeps $12.00 target at Eight Capital

Vancouver-based healthcare tech company WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL) is looking like an exceptionally attractive pickup at current levels, according to Haywood Capital Markets analyst Colin Healey, who on Monday delivered a report to clients on WELL. Healey reiterated his “Buy” rating for the stock and $12.00 target price, which at press time represented a projected one-year return of 173.3 per cent.

WELL Health Technologies is a omni-channel health company with businesses including primary and specialized health clinics, Electronic Medical Records (EMR), virtual medical platforms in the US and Canada and digital patient engagement tools. The company provided on Monday a business update and preliminary first quarter 2022 financial numbers, saying it expects Q1 revenue to exceed $120 million, operating Adjusted EBITDA to exceed $20 million and Shareholder Free Cash Flow of about $10 million. By those numbers, revenue would be up over 369 per cent year-over-year and up about four per cent sequentially.

WELL said it had 772,093 patient omni-channel visits across the first quarter, which came as a 62 per cent year-over-year increase and a ten per cent sequential jump, while its Ontario-based healthcare network MyHealth conducted 149,906 diagnostic visits in the quarter and its US-based women’s health-focused platform Wisp had 142,988 asynchronous patient consultations. Combining omni-channel, MyHealth and Wisp, patient interactions hit 1.06 million for an annual run-rate of 4.26 million patient interactions.

“We are pleased to report that WELL is on the cusp of delivering its best ever quarter of revenue performance in Q1 which is generally a quarter that is adversely affected by seasonality,” said Hamed Shahbazi, Chairman and CEO of WELL, in a press release. 

“Patient visits are a strong leading indicator for WELL’s business. This report confirms that WELL continues to execute operationally and be favourably positioned to continue to grow organically and inorganically. We continue to believe revenue, Adjusted EBITDA and Shareholder Free Cash Flow are key metrics for shareholders to watch as we expect them to continue to rise on a per share basis. We look forward to reporting our Q1 results and remain very positive on our business,” Shahbazi said.

Commenting on the update, Healey said the preliminary Q1 results came in slightly above his estimates. He said WELL’s US-based virtual health service businesses continue to perform well, as virtual platform Circle Medical and Wisp are now exceeding $100 million in combined annualized revenue run-rate, which would be a 150 per cent year-over-year growth, with positive adjusted EBITDA. On the M&A front, Healey said he’s anticipating WELL and its US gastroenterology and anaesthesia business CRH Medical to be “selectively acquisitive” in 2022, which would backstop and provide confidence in WELL’s ability to meet his revenue projections, which call for 67 per cent growth in 2022 and eight per cent in 2023. 

“Given the robust organic growth, dry powder on the balance sheet and WELL’s healthy pipeline of targets, we expect the probability of upward adjustment to our 2022/23 forecasts to remain high,” Healey wrote.

On the numbers, the analyst is calling for 2022 revenue and EBITDA of $505.4 million and $95.7 million, respectively, and for 2023 revenue and EBITDA of $543.7 million and $108.8 million, respectively. Healey sees WELL’s EPS going from $0.04 per share in 2022 to $0.00 per share in 2023.

“WELL continues to evolve, rapidly growing its revenue, market footprint and underlying financial metrics both organically and through complementary acquisitions. Shares have been under pressure alongside the sector and broader markets. We see WELL as extremely attractive at these levels with the underlying businesses performing very strongly,” Healey said. “We continue to like WELL, underpinned by strong management and evolving technical offerings.”

WELL’s share price has been hugging the $4.50 mark for much of the year so far, coming off a 2020 where the stock gained 416 per cent and a 2021 where it lost 39 per cent. 

WELL’s latest M&A move was a strategic investment in Tali.ai, a AI-powered virtual assistant for healthcare providers and an informational retrieval engine. Tali.ai uses Natural Language Processing algorithms to allow doctors to ask questions and get answers back from resources such as EMR software. WELL said it has made a “significant minority investment” in Tali.ai.

“We are excited to closely collaborate with Tali.ai to create a transformative healthcare productivity and efficiency tool.  Tali’s technology allows doctors to have a voice conversation with their EMR and quickly retrieve information at the point of care,” said Shahbazi in an April 13 press release. “This investment is a continuation of WELL’s efforts to support doctors and be at the frontier of innovative healthcare technology.”

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