Ventum Capital Ventum Capital Markets analyst Rob Goff is bullish on the “the transformative growth” of Healwell AI Inc.’s (“complementary portfolio assets together with opportunities envisioned through its WELL Health alignment.”
In a research report titled Organic Growth, Inorganic Wins—A Perfect Symbiosis, he resumed coverage of the Toronto-based company, formerly known as MCI Onehealth Technologies Inc., with a “buy” recommendation, calling it “an advantaged acquirer adding significant shareholder value through acquisitions where its platform directly and through its partners offers unique earnout leverage to attract strong target acquisitions on accretive terms.”
“We are bullish on the profitable growth prospects for HEALWELL AI’s symbiotic portfolio assets where its AI-driven identification and prognostic care integrate with its Healthcare Software, Electronic Health Records (EHR), and Contract Research Organization (CRO) services,” he said. “The portfolio is then uniquely leveraged by its alignment with WELL Health whose reach into 30 per cent of Canadian clinics and strong U.S. profile has the potential to source significant upselling opportunities. The portfolio and partner strength can be leveraged to attract and execute accretive, strategic, and inorganic growth. The Board and senior leadership team’s strong track records and industry profile and the revenue synergies within its portfolio broaden the pool of potential targets while offering unique earnout economics. Where WELL monetizes its highest growth assets, we see HEALWELL taking on greater portfolio value.
“Our bullish view draws on HEALWELL’s AI capabilities to drive revenues directly and across its partner streams. We also have confidence in HEALWELL’s AI capabilities where it has secured six master service agreements (MSAs) from the top ten global pharmaceutical organizations, including industry giants like Johnson & Johnson (JNJ-NYSE, Not Covered) and AstraZeneca (AZN-LSE, Not Covered).”
Mr. Goff emphasized access to capital and prospective clients are “fundamental cornerstones” of his positive view on Healwell’s “aggressive acquisition mandate.”
“The strength of the WELL Health partnership ensures that HEALWELL draws interest from the strongest potential acquisitions where prospective revenue synergies support unique earnout economics,” he adde. “Consequently, we see HEALWELL positioned to follow a comparable acquisitive growth strategy to WELL Health (completed $1-billion-plus in M&A across 70+ transactions with no write-downs) where HEALWELL functions as WELL’s vehicle for efficient capital allocation, targeting preventive health and AI ventures. HEALWELL’s cost of capital is expected to remain below that of WELL’s given its maturing growth profile and discounted valuation. Growth will be driven by a robust M&A pipeline, with the current estimated cash reserves at $15-million including the $20-million equity financing completed in May 2024.”
“HEALWELL is strategically positioned for success in AI-driven health data analytics, particularly in early disease detection. With AI stocks anticipated to excel, we see HEALWELL as a compelling investment opportunity in this dynamic sector. The strategic fit of the portfolio brings greater confidence that management has more levers to pull ensuring accelerated AI development and commercial traction.”
Seeing the potential for it to be EBITDA positive in 2025, the analyst set a target price of $3.50. The average on the Street is $3.91.
“Where AI stocks are negatively impacted by early delays in building commercial traction, HEALWELL stands to outperform its peers. Its integrated capabilities and platform reach bring greater confidence that it will see successful deployments whereas an acquirer with access to capital could benefit from reduced target valuations,” he concluded.