On Friday, CIBC increased the price target for Well Health Technologies Corp. (WELL:CN) (OTC: WLYYF) shares to C$5.00, up from C$4.75, while maintaining a Neutral rating on the stock. The adjustment comes after Well Health reported a second-quarter revenue and EBITDA that exceeded expectations, propelled by strong growth and better-than-expected profitability at Circle Medical, its subsidiary.
The analyst from CIBC noted that the performance of Circle Medical is particularly significant given that the unit is currently on the market and likely to be sold. The robust results could influence the potential sale valuation. However, the analyst also pointed out that the approximately 8% organic growth in the company's core business that is not for sale is considered healthy.
Well Health has also announced its intention to spin out its Software as a Service (SaaS) and technology division. The company's management believes that the digital business is being undervalued within the current structure of Well Health. This strategic move is aimed at unlocking value for shareholders.
The revised stock price target of C$5.00, up from C$4.75, is based on a Sum of the Parts (SoTP) valuation method. Despite the positive outlook on the company's performance and strategic plans, CIBC's analyst maintains that the shares are relatively fairly valued at their current levels, hence the decision to retain a Neutral rating.
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