Well Health: Canaccord Slashes Price Target To $6

On May 11th, WELL Health Technologies Corp. (TSX: WELL) reported its first quarter financial results. The company reported revenues of $126.5 million, up from $115.68 million sequentially. Gross profits meanwhile increased to $69.39 million, but as a percentage of revenue, it is flat sequentially at 54.8%.

The company’s adjusted EBITDA came in slightly lower quarter over quarter at $23.49 million, compared to $25.68 million last quarter. TWell Health also reported a decline in sequential adjusted net income, reporting $8.65 million versus $9.75 million last quarter.

Lastly, the company said its total omnichannel patient visits for the first quarter was 772,093, an increase of 10% sequentially. They reported that MyHealth conducted 149,906 visits while Wisp completed 142,988 consultations, putting the company’s total patient interactions at 1,064,987.

Additionally, on the same day, WELL Health announced that it would be conducting a bought deal. The financing saw the sale of 8,109,000 shares at $3.70 for total gross proceeds of $30 million, with a 15% over allotment option which would provide an additional $4.5 million in gross proceeds.

The company said it “has received indications of interest for lead orders in connection with the Offering from a large International Sovereign Wealth Fund and Hong Kong businessman and investor Mr. Li Ka-shing.”

WELL Health currently has 11 analysts covering the stock with an average 12-month price target of C$8.88, or an upside of 164%. Out of the 11 analysts, 1 has a strong buy rating, 9 have buy ratings and the last analyst has a hold rating on the stock. The street high price target sits at C$13.50 or a 300% upside to the current stock price.

In Canaccord Genuity’s note on May 19, they reiterate their buy rating but cut their 12-month price target from C$10 to C$6, saying that the price target cut comes primarily from multiple compression that many stocks are seeing right now while factoring in a small amount of dilution.

On the bull side, Canaccord says that WELL Health’s cash flow and capital markets support the company’s position as a consolidator and that the prospectus filed on May 19th supports this idea. Management noted they have seen an increased opportunity for tuck-in M&A due to the multiple compression happening in health tech assets.

On the results, Canaccord says that there was only a positive surprise. Both revenue and adjusted EBITDA was above the street’s $118.8 million and $19.9 million estimates, respectively. The beat comes from M&A and organic growth, which included a higher volume of patients.

Canaccord says that the company’s outlook “points to profitability” as they have increased their full-year revenue outlook to >$525 million from $500 million. They note that management was also very upbeat on the call, saying that performance remains “very positive” across each of the company’s businesses.

Below you can see Canaccord’s updated estimates.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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