OUR TAKE: Positive. Update showcases clear disconnect between fundamentals and the market. This morning, WELL delivered a business update which to us was a clear showing of the strong underlying growth trends within the business. Among the key items released, we’d highlight:
- Revised guidance for run-rate revenue exiting Q4 of >$450M (better than expected), with line of sight on $500M in revenue within 2022 (SGBM expectations).
- Annualized operating Adj. EBITDA approaching $100M as of Q4.
- Robust ~19% Q/Q growth in case volumes (excl. WISP and MyHealth).
- Solid FCF generation at CRH, which for 2021 is expected to total ~US$43M.
However, despite strength in fundamentals, WELL’s share price is now down ~57% from 52-week highs and ~40% since Q3 results. While we understand that the macro backdrop is currently unfavorable for growth oriented names,
with WELL being one of the few “digitally exposed” companies that pack a one-two of growth and positive EBITDA/FCF, we believe that the market has gotten it wrong in this case. On our current numbers, WELL exits the day trading at ~14.5x FWD shareholder EBITDA, which seems undervalued to us given recent growth trends.