Following its most recent acquisition, Eight Capital analyst Christian Sgro has raised his price target on HEALWELL AI (HEALWELL AI Stock Quote, Chart, News, Analysts, Financials TSX:AIDX).
On June 11, AIDX announced the acquisition of New Brunswick-based digital health company Verosource Solutions for approximately $24.5-million.
Dr. Alexander Dobranowski, chief executive officer of Healwell, stated: “We are excited to announce the proposed acquisition of VeroSource, who has created a compelling data interoperability platform that powers large enterprises such as provincial health systems. Once integrated with our best-in-class AI-powered disease detection and patient identification capabilities, VeroSource has the potential to roll out very significant population health features that are very much at the core of value-based health care trends. VeroSource has demonstrated impressive historical revenue growth rates of 30-per-cent CAGR [compound annual growth rate], with a strong pipeline of long-term contracts producing a mix of one-time and recurring SaaS [software-as-a-service] revenue. We look forward to building on their exceptional track record by leveraging our deep connectivity to the Canadian outpatient landscape through our partnership with Well Health and their successful public sector sales program. We are excited about the growth synergies and the potential to expand our footprint rapidly into new provinces.”
The analyst summarized the development.
“HEALWELL announced the $24.5M acquisition of VeroSource, an innovative, cloud-based digital health tool that services the public sector,” he wrote. “The deal is accretive at up to 3.1x estimated 2024 revenue, building on HEALWELL’s digital footprint and software operating profile. With more data points around pharma commercialization (Tempus AI S1 here), and AI valuations at premiums (Cohere raised at 142x TTM revenue), we expect continued momentum in HEALWELL’s share price as the company attacks a unique opportunity in healthcare AI. With much of the VeroSource consideration to be issued as equity, we model over $20M of cash for HEALWELL to continue scaling its top-line, with $50M+ of runrate revenue in sight with more deals like VeroSource”
In a research update to clients June 12, Sgro maintained his “Buy” rating on AIDX but raised his price target on the stock from $2.50 to $4.00.
The analyst thinks AIDX will post Adjusted EBITDA of negative $6.1-million on revenue of $26.8-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of negative $2.2-million on a topline of $45.6-million in fiscal 2025.
Sgro says more M&A might be forthcoming.
“Pro forma the transaction we calculate a net cash balance of $21.3M, which includes Q1/25 acquisition obligations and excludes deep in-the-money convertible debentures and related party balances,” he added. “As HEALWELL navigates to cash flow breakeven, we see the potential for several more deals similar in size that will add financial and synergistic value to the platform.”