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Things are looking up for the Healthcare Technology space, according to Desjardins Capital Markets who delivered on Thursday an update on the sector. The report says demographics, overworked healthcare systems and growing interest in private health care provision are all looking like tailwinds for stocks.
Desjardins analyst Jerome Dubreuil argued that an industry-wide shortage of practitioners is part of the picture, pointing to a rash of 13 healthcare worker strikes in the United States over the past 12 months as evidence, where workers are saying they’re understaffed and overworked, leading to higher burnout rates and higher employee turnover. The result is an environment which is ripe for more investment in technology to help ease some of the burdens on healthcare systems, the analyst said.
“We believe it could become more difficult for healthcare workers to address the growing burden they face unless decision-makers accept the need to invest more in technology,” Dubreuil wrote.
On the Canadian side, Dubreuil noted recent moves by the Ontario government to involve private sector clinics in easing the backlog of procedures built up over the pandemic, along with a recent poll of Quebecers which suggested the population is more amenable to private sector involvement to support provincial healthcare delivery.
Dubreuil said expansion of private clinics would be good for a number of companies, including WELL Health Technologies and Think Research. The analyst also noted the increase in use of telehealth services will be of benefit to companies like WELL Health and Dialogue Health Technologies.
“While practitioner shortages may also affect private companies, we believe the data suggests the gap between the demand and supply of healthcare services is widening. We believe this trend, coupled with greater willingness on the part of governments in Canada to allow more private sector involvement in the healthcare sector, should benefit the healthcare technology companies we cover,” he said.
Stock: Dialogue Health Technologies (Dialogue Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:CARE)
Desjardins rating: Buy
Desjardins target price: $5.00
Projected one-year return: 38 per cent
Dubreuil said a record pipeline in the 2022 readout so far should generate decent topline growth for Dialogue’s upcoming fourth quarter, while he expects the company to turn EBITDA-positive during the second half of 2023.
Stock: LifeSpeak (LifeSpeak Stock Quote, Charts, News, Analysts, Financials TSX:LSPK)
Desjardins rating: Buy
Desjardins target price: $1.25 (previously $2.25)
Projected one-year return: 84 per cent
Elevated leverage is the prime reason for the target reduction on LifeSpeak, according to Dubreuil. The analyst thinks the company’s fourth quarter 2022 revenue could show the negative impact of elongated sales cycles, which would be consistent with commentary from industry peers.
Stock: Think Research Corp (Think Research Stock Quote, Charts, News, Analysts, Financials TSXV:THNK)
Desjardins rating: Hold
Desjardins target price: $0.70 (previously $0.55)
Projected one-year return: 8 per cent
A newly announced big contract win looks good on THNK, according to Dubreuil, who said profitability is likely to continue improving in 2023 as the company’s marketing investments made in previous quarters translate into sales and as clinical research operations normalize.
Stock: WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL)
Desjardins rating: Hold
Desjardins target price: $5.00
Projected one-year return: 8 per cent
Dubrueil said WELL Health’s MyHealth currently 46 clinics in Ontario are ideally positioned to benefit from the Ontario government’s move toward private healthcare delivery. The analyst also noted that recent insider buying of WELL shares represents a vote of confidence in the company and stock.
(Disclosure: Nick Waddell and Jayson MacLean own shares of WELL Health Technologies and WELL is an annual sponsor of Cantech Letter.)