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“Just too low”: Raymond James raises target price on WELL Health

WELL Health

It’s a digital health stock that trades like a railroad and Raymond James analyst Michael W. Freeman has a problem with that.

On November 30, in a research update to clients, Freeman maintained his “Outperform 2” rating but raised his target price on WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News, Analysts, Financials TSX:WELL) from $8.50 to $9.00, implying a return of 137.5 per cent at the time of publication.

The analyst explained the reasoning behind his decision.

“The way we see it, WELL has established a path to dominating primary healthcare in Canada, carving out a defensible niche in U.S. specialty care, and leaning deep into AI-enabled care provision, all at the same time,” he wrote. “WELL’s diversified, fast-growing, and profitable platform offers investors well-insulated exposure to the North American healthcare provider sector, and we think this is worth well in excess of 1x FY24 P/S (where the stock is now).”

Freeman thinks WELL will generate Adjusted EBITDA of $113-million on revenue of $761-million in fiscal 2023. He expects those numbers will improve to Adjusted EBITDA of $131-million on revenue of $913-million the following year.

The analyst says the company’s most recent quarter provided more evidence of its momentum.

“WELL printed a very strong 3Q23, beating our and the Street’s estimates of Rev. and adj. EBITDA, driven mainly by solid outperformance across WELL’s US business, particularly CRH Medical,” he said. “WELL recorded ~1.6 mln patient interactions across its platform (6.4 mln run-rate; Exhibit 1) during the quarter, drove $205 mln in Rev., and produced $28 mln in adj. EBITDA ($23 mln for WELL shareholders; full numbers below). 3Q23 represented the first partial (~80%) quarter of Rev. contribution from CRH Medical’s CarePlus acquisition (anesthesia, medical staffing, billing services), which demonstrated to us that this business drives closer to $100 mln in annual Rev. (vs. $80 mln, as we had conservatively estimated), albeit at a lower EBITDA margin than the balance of WELL’s platform. We anticipate another solid sequential bump in Rev., as 4Q23 will see a full quarter of CarePlus Rev. (~$25 mln) and first Rev. contribution from Ontario, CA-based primary care clinics acquired from MCI/HEALWELL (>$5 mln), the sum of which supports the escalation of WELL’s FY23 Rev. guidance ($755-765 mln). Strong organic growth across the platform likely motivated the issuance of strong FY24 Rev. guidance (>$900 mln; we est. >$910 mln, or ~20% Y/Y growth) as well as CEO Hamed Shahbazi’s statement that WELL could hit a $1.0 bln run-rate by FYE24, nearly 1 year ahead of our prior estimates.”

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

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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