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WELL Health is a Buy, says Paradigm

Top and bottom beats look good on WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL), according to Paradigm Capital analyst Daniel Rosenberg, who reiterated a “Buy” rating in a Sunday update to clients, saying WELL’s first quarter results were strong and the company has sector tailwinds in the digital healthcare space.

Vancouver-based WELL Health delivered its Q1 on May 12, coming in with revenue up 34 per cent year-over-year to $169.4 million and adjusted EBITDA up 14 per cent to $26.7 million.

The company, which has clinic and virtual healthcare assets in Canada and the US, said it reached 975,000 total patient visits over the quarter, up 25 per cent from a year earlier, with its Canadian Patient Services visits up 14 per cent and US Patient Services visits up 40 per cent.

“WELL is expecting its strong performance in the first quarter to continue across all its business units and for the entire Company as a whole. WELL’s objective is to invest in and achieve significant growth while effectively managing its costs and delivering cashflow to shareholders,” the company said in a press release.

Rosenberg said WELL’s Q1 topline of $169.4 million was above his estimate at $161.0 million and the consensus at $159.8 million, while EBITDA at $26.7 million was also above his forecast at $25.8 million and the Street at $25.3 million.

The analyst noted management’s new increased guidance, which calls for full 2023 revenue of $690-$710 million compared to the prior outlook of $665-$685 million. Adjusted EBITDA guidance was left unchanged and calls for a year-over-year increase of ten per cent.

“WELL will take profits and re-invest in the business as it continues to see substantial opportunities across business lines. The company also suggested that we could see an acceleration of M&A activity in the near term,” Rosenberg wrote.

“WELL is executing nicely and we continue to favour the company’s reliable growth and massive market opportunity,” he said.

Rosenberg reminded investors of recent movements in the health tech space, where CVS bought Oak Street Health and Amazon acquired One Medical. He considers both companies as directly comparable to WELL, although WELL is set apart in being EBITDA positive and cash generating. The analyst also pointed out a tailwind in an improving regulatory landscape for health tech, noting the Canadian federal government’s announced ten-year $196 billion budget for healthcare. 

“WELL is in the early innings of establishing itself as a large provider of tech- enabled healthcare delivery. For investors, it is an M&A consolidator, which can drive value within the massive healthcare market that is ripe for digital transformation,” Rosenberg wrote.

With the update, Rosenberg reiterated a “Buy” rating and target price of $8.50 on WELL, which at press time translated to a projected one-year return of 47.1 per cent.

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

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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