Desjardins Capital Markets analyst Jerome Dubreuil has revised his forecast and somewhat lowered his expectations on Canadian health and wellness stock LifeSpeak (LifeSpeak Stock Quote, Charts, News, Analysts, Financials TSX:LSPK). In a client note on Friday, Dubreuil maintained a “Buy” rating on LifeSpeak while lowering his target price from $4.50 to $2.25, saying a drop in topline growth raises concerns but the company is doing well at on-boarding new customers to its platform.
Toronto-headquartered LifeSpeak, which has SaaS-based mental health and total wellbeing solutions for mid-size and enterprise level clients, announced its third quarter 2022 financials on Thursday, showing revenue up 116 per cent year-over-year to $12.8 million and adjusted EBITDA of $3.1 million compared to $1.6 million a year earlier.
The company said the Q3 is usually a lower activity quarter but it added 65 new enterprise customers on a pro forma basis when considering the recent acquisitions of Lift Session, Alavida, Torchlight and Wellbeats.
“During the third quarter, we continued to integrate the products of our acquired platforms, cross-sold products to existing clients, signed a significant number of new clients, and executed on our core strategy of building a platform to improve the wellbeing of individuals,” said Michael Held, CEO and Founder, in a press release.
“Despite broad economic headwinds, we have built a company that is stronger than ever, with limited customer concentration and multiple paths to expand our existing revenue base, and win new customers,” he said.
Dubreuil called the quarterly results mixed, with a miss on the topline. Q3 revenue of $12.8 million compared to the consensus call at $13.5 million, while the adjusted EBITDA of $3.1 was in-line with the Street’s forecast at $3.1 million. Dubreuil noted that gross margin was a strong 91 per cent, the company’s highest in five quarters.
At the same time, he pointed to the fact that management did not officially reiterate its 2022 guidance with its third quarter comments, which amounts to “a negative sign of management’s visibility on future results,” Dubreuil said.
“We have significantly reduced our target to $2.25 (from $4.50) to reflect our lower medium-term, top-line growth expectations. However, we believe the challenges we see are already reflected in the share price,” he wrote.
With the update, Dubreuil dropped his full 2022 revenue forecast from $50.4 million to $47.8 million and his adjusted EBITDA forecast from $10.8 million to $9.5 million. For 2023, he is now expecting total revenue of $59.9 million and EBITDA of $19.5 million. At press time, Dubreuil’s new $2.25 target represented a projected one-year return of 106 per cent.