Analysts at Canaccord Genuity (TSX:CF, LSE:CF) and Stifel GMP have both repeated their ‘Buy’ rating for WELL Health Technologies after the digital health company posted stronger-than-anticipated fourth quarter results and upped its 2023 outlook.
WELL Health Technologies shares surged 8% on Tuesday after the company posted 4Q revenue of $156.5 million and gross adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $27.2 million.
Wall Street analysts had been expecting revenue of $153.6 million and adjusted EBITDA of $26.7 million.
The company also issued new 2023 guidance of revenue between $665 million to $685 million, up 17% to 20% year-over-year and above prior estimates, which was highlighted by analysts at both firms.
Canaccord analysts wrote in a note to clients that the message from WELL was that the company would continue to reinvest in high-growth platforms, including Circle and WISP, which is expected to contribute to the overall 17% to 20% top-line growth rate in 2023.
“This means more metered EBITDA expansion, seen up to 10%-plus year-over-year, given increased investment,” they wrote.
The analysis increased their price target from C$6 to C$6.50. WELL shares were trading modestly higher at about C$4.43 on Wednesday afternoon.
“We believe the company’s premium valuation on EBITDA is increasingly justified by its record of execution against expectations, its M&A optionality, and that its high-growth assets don’t yet fully contribute mature EBITDA margins,” they wrote.
Stifel’s analysts noted that WELL’s 4Q results demonstrated the company’s continued solid growth at a higher scale.
In addition to repeating their ‘Buy’ rating, the analysts reaffirmed their price target of C$13.50.
“We continue to favor WELL as a high growth play in healthcare, where there are few ways to gain exposure to billions of new federal funding in Canada, along with a developing two-tiered healthcare system,” the analysts wrote in a note.
“WELL has the largest network of primary and specialty care clinics in the country, and we expect this position to strengthen ahead.”
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