Desjardins Securities With “mounting recessionary concerns and rising rates,” Desjardins Securities analyst Jerome Dubreuil predicts “a period of capital preservation ahead” for healthcare companies in his coverage universe.
“Although healthcare is resilient relative to other industries, access to capital markets has deteriorated and caused our coverage companies to increasingly focus on profitable growth, which may not be all that bad long-term,” he said.
Citing renewed investor focus on profitability and free cash flow versus growth as well as the impact of higher interest rates, the analyst reduced his valuations, leading to lower target prices for the companies’ shares.
“Given our view that health tech continues to provide strong utility for users, we believe concerns on churn/the slowdown related to the reopening of the economy are overblown,” he said.
Well Health Technologies Corp. (“hold”) to $6 from $7. Average: $8.27.
increas “hold”) to $6 from $7. Average: $8.27.
“While the longer sales cycles noted by U.S. peers represent a risk for the other healthcare stocks we cover, we believe WELL has relatively limited exposure to this issue. We were pleasantly surprised by the company’s pre-released results for 2Q, which showed that it might slightly exceed prior expectations. WELL’s growth can be attributed to continued strength in omni-channel visits as well as a continuing trend of strong U.S. business. We highlight the contrast between these good results and how poorly valuations have performed recently.”