Buy AIDX for a double, Eight Capital says

Following a recent financing, Eight Capital analyst Christian Sgro remains bullish on HEALWELL AI (HEALWELL AI Stock Quote, Chart, News, Analysts, Financials TSX:AIDX).

On December 22, AIDX completed a bought deal, issuing 14,375,000 units at $0.80 to raise $11.5-million.

“We are grateful for the continued support of our dedicated shareholders and welcome new investors to Healwell,” CEO Dr. Alex Dobranowski said. “This milestone marks not just a financial achievement but a significant step towards realizing our mission to improve healthcare and save lives through the early identification and detection of disease. With cutting-edge AI and data science technology, we are committed to pioneering solutions that play a pivotal role in patient outcomes. The successful completion of this financing strengthens our balance sheet and allows us to accelerate our growth initiatives, including our product development and commercialization efforts.”

The analyst says like its partner WELL Health, he expects AIDX will focus on growth through acquisitions.

“We expect M&A to be the key use of proceeds,” Sgro said. “We believe management is maintaining an active list of targets, with lead generation and support from WELL Health’s corporate development arm. Management has previously outlined three key areas for investment: Technology. This includes complementary analytical capabilities that can support HEALWELL’s IT infrastructure. Ideally non-zero revenue demonstrating commercial traction, like Pentavere. Software. More mature software businesses with access to data or providers that can expand HEALWELL’s footprint while adding high margin, stable revenue. A niche EMR is an example. Clinical research support. A CRO or other clinical research network would expand patient access while adding cash flows, given the maturity of this type of model and asset.”

In a research update to clients December 22, Sgro maintained his “Buy” rating and price target of $1.50, implying a return of 111.3 per cent at the time of publication.

The analyst thinks AIDX will post an Adjusted EBITDA loss of $2.9-million on revenue of $14.3-million in fiscal 2024. He expects those numbers will improve to EBITDA of positive $700,000 on a topline of $20.3-million the following year.

Disclaimer: Nick Waddell owns shares of HEALWELL AI and the company is an annual sponsor of Cantech Letter.