Is WELL Health Stock a Buy? (September, 2023)

It was a high-flier during the pandemic, when modern digital health stocks first emerged.

And while it has yet to recapture the lofty $9.00 plus level, WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News, Analysts, Financials TSX:WELL) has been steadily doubling down on its growth-through acquisition model, sending its topline soaring.

So is the stock a buy here in September, 2023? We check in with some of Canada’s best tech analysts to find out.

WELL Health Stock Analyst Opinion: Stifel

In July, Stifel analyst Justin Keywood reiterated his “Buy” rating on the stock. Keywood said investors will want to own shares in WELL for both its M&A and organic growth potential.

On his investment thesis for WELL, Keywood said recent transactions are adding valuable SaaS revenue and that the M&A pursuit has become much more valuable with changes in telehealth billing codes. He added that WELL’s growing clinic portfolio gives it a unique situation from which to develop and test new technologies before further expansion.

On its organic growth potential, Keywood said, “WELL can roll out its acquired and developed technologies across Canada and into the U.S., leading to possible accelerated organic growth. The company can also increase organic growth at its clinics by adding additional doctors to fill extra available capacity that now includes virtual visits.”

With his “Buy” rating, Keywood maintained a target price of $13.50 per share, representing at press time a projected return of 195 per cent.

WELL Health Stock Analyst Opinion: PI Financial

Over at PI Financial, analyst Jason Zandberg has nominated WELL as PI’s highest-conviction idea among tech-focused peers for the remainder of 2023.

In a Top Picks update In July, Zandberg said Canada’s tech sector had a respectable first six months of the year despite unflattering press coverage, which focused on high-profile layoffs at companies like Shopify and OpenText. Zandberg said PI’s Canadian tech sector index was up 23.4 per cent year-to-date but is still down from its peak in November 2021.

Artificial intelligence (AI) stocks have done very well, the analyst noted, pointing to big names likes Microsoft and Nvidia but also to WELL, which made headlines recently with the launch of its Voice AI for physicians. Healthcare tech stocks as a subsector have performed positively, Zandberg said, as the global healthcare market is being disrupted and digitized by tech vendors like WELL.

“The use of technology is clearly required in Canada to improve efficiency of the system. Healthcare spending in the US reached nearly US$3.8 trillion in 2019, representing ~18 per cent of US GDP. The US spent ~US$11,500 per person on healthcare in 2019, more than any other country in the world. Another obvious region where technology can help to lower delivery costs and improve patient outcomes. WELL has operations in both Canada and the US,” Zandberg said.

Zandberg looked to WELL’s gastroenterology and anaesthesia subsidiary CRH Medical’s investment in Graphium as well as its CarePlus acquisition as examples of how WELL appears to be mirroring in the United States its “very successful” Canadian strategy of digitizing healthcare.

On valuation, Zandberg estimated WELL to be currently trading at an EV/EBITDA multiple of about 10.7x, which represents a discount to its Healthcare Tech peers which trade at an average multiple of 17.9x.

With the update, Zandberg reiterated a “Buy” rating on WELL and 12-month target of $7.75 per share, representing at press time a projected return of 81 per cent.

WELL Health Stock Analyst Opinion: Raymond James

In May, Raymond James analyst Michael W. Freeman said investors can expect WELL to bulk up its clinic ecosystem across Canada this year in an attractive market for primary healthcare buyers.

“Following its 1Q23 earnings, we were impressed by WELL’s capacity to drive powerful growth across its diverse business units in the absence of M&A, but we did, however, anticipate primary care-focused M&A to pick up through the balance of the year given attractive opportunities in-market,” Freeman wrote.

“This is exactly the sort of deal we wanted to see to start off WELL’s summer of M&A,” he said.

By the numbers, Freeman expects WELL’s revenue to go from $569 million in 2022 to $700 million in 2023 and to $795 million in 2024, while adjusted EBITDA is forecasted to go from $105 million in 2022 to $117 million in 2023 and to $133 million in 2024.

With the update, Freeman reiterated an “Outperform” rating on WELL and one-year target price of $8.50 per share, which represented at press time a projected return of 85 per cent.

Disclosure: WELL Health is an annual sponsor of Cantech Letter and Nick Waddell owns shares of the company.