WELL Health’s tech isn’t getting any love, Stifel says

It’s made a variety of tech related announcements of late, but WELL Health (WELL Health Stock Quote, Chart, News, Analysts, Financials TSX:WELL) is still being valued like a brick and mortar affair and that means opportunity for investors.

So says Stifel analyst Justin Keywood, who in an update to clients October 26, reiterated his “Buy” rating and one-year price target of $12.00 on WELL stock.

On October 26, WELL announced that its Cucura business had made two acquisitions; Seekinto, which provides cyber security for enterprise clients, and Proack Security, which offers “penetration testing, red teaming, social engineering, and infrastructure testing”.

“Pro-actively identifying and mitigating threats remains at the forefront of our cybersecurity road map,” said WELL chief security officer Iain Paterson. “These newly acquired capabilities signify our commitment to protecting and further advancing the empowerment of patient health information (PHI) at scale. As the digital landscape of health care grows in complexity, we are investing in, and leveraging, AI [artificial intelligence] technology heavily in our cybersecurity programs, both internally and customer facing.”

Keywood says these acquisitions, which come on the heels of its investment into HEALWELL AI, are being assigned no value, something he thinks is a major error of omission on behalf of the capital markets.

“WELL announced acquisitions within its cybersecurity unit (Cycura) for Seekintoo and Proack. WELL also disclosed a target for cybersecurity to achieve $100mm in sales within ‘the next several years’, where we estimate current sales of $20-$30mm. The bolstering of cybersecurity makes strategic sense as WELL pursues AI initiatives. We continue to see WELL as in a favorable position to implement AI and technologies into the doctor’s office. There have been related U.S. initiatives with Google and Mayo Clinic for example but without major competition in Canada to note and WELL holds the #1 market share. WELL’s shares declined (5%) yesterday as U.S. health-tech peers saw weakness. We see WELL’s business as much more diversified and profitable vs. peers with an Omni channel approach as AI initiatives progress. WELL trades at 1.5x Fwrd sales and 9.7x EBITDA, reflective of services but essentially no value attributed to tech or strategic assets.”

Keywood thinks WELL will generate EBITDA of $115.9-million on revenue of $757.6-million in fiscal 2023.

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