WELL Health Stock: Buy, Sell, or Hold?

WELL (TSX:WELL) stock has some strong reasons to consider it as a long-term hold, with full-year earnings due that could shed some light.

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Investors in WELL Health Technologies (TSX:WELL) have been champing at the bit to learn more about the company’s full-year earnings. Earnings have been a huge catalyst for growth over the last few months, shifting from growth from inflation and interest rate announcements.

WELL stock could very well be the next one to see a surge or drop after earnings. And it will likely all come down to the outlook. So, let’s look at some reasons to consider buying, selling, or holding the stock ahead of its full-year release.

Buy

When it comes to growth potential, WELL stock is one to beat. The high-growth company has seen more and more growth in the telemedicine and digital health space over the years, which already is a rapidly growing industry. Analysts in fact predict that strong revenue growth will continue for WELL stock for years to come. And this could help it exceed beyond the broader healthcare industry.

Part of this comes down to its resilient business model. WELL stock generates high percentage increases from recurring revenue, with 95% of revenue coming from subscriptions and service fees. This provides the stock with stability rather than reliance on product sales. Furthermore, this is within the healthcare sector, which provides more stability compared to the economy at large.

Finally, WELL stock has proven time and again to make strong, strategic acquisitions that help expand its reach and services. This should help the company continue to fuel further growth, with full-year earnings painting a clearer picture.

Sell

Now this is certainly a rosy picture, but there are some issues WELL stock will continue to need to tackle. For instance, WELL stock shows strong growth potential, but its stock price might already reflect that expectation. Therefore, even after shares have surged and come back down, there still might be little room for any significant price appreciation in the near term.

Furthermore, the telemedicine sector isn’t a secret to success. The space is heating up, and established players along with new entrants are all wanting a piece of the action. That increased competition could put a damper on any growth in margins and prospects for WELL stock.

Then there are those acquisitions I was talking about. While they’re great for expanding, they cost money. Those integrations bring along with them their own set of risks. With a company that relies so heavily on acquisitions for growth, integration success will be key. So, any bumps along the road could hinder progress.

Hold

Investors considering WELL stock as a long-term hold certainly then do have some factors to consider. Overall, the company does seem to have some strong reasons to buy or hold the stock, given its past success and future expansion opportunities.

That being said, companies that edge in on its acquisitions strategy or macro economic factors could all push the stock lower as well. We’ve already seen this in the past.

But what I like about WELL stock comes down to one thing and one thing only: recurring revenue. That 95% of its revenue is tied to subscriptions and service fees is excellent. That’s predictable cash flow you can bank on for long-term growth and stability. And for now, that’s enough for me to continue holding the stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Well Health Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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