There was a time when WELL Health Technologies (TSX:WELL) was one of the best performers on the market. Shares of WELL stock surged to all-time highs during the shutdowns around the world during the pandemic.
Yet once restrictions were lifted, WELL stock fell almost immediately. The company has since struggled to come back. However, if you had invested $1,000 in shares back in 2019, it would now be worth $5,400!
Even so, if you had purchased those shares at all-time highs around $9 per share, that would have shrunk down to just $390 as of writing. So let’s look at why the company has been falling in share price, and if it’s due to climb back.
Recent moves
The recent drop in share price mainly comes down to earnings. The company came out with fourth quarter results that surged past estimates, yet full-year results weren’t great. And the outlook wasn’t stunning either.
The full year still saw record annual adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $113.4 million. This was an 8% increase from 2022. And while that’s great, it was a drop from previous huge growth numbers demonstrated over the years.
Furthermore, the company announced it would continue to make cost-cutting measures. This included restructuring, with staff reductions and increased utilization of artificial intelligence (AI) and tech to optimize improvements.
Looking ahead
The full-year results were record breaking, but after a poor second and third quarter, investors wanted a lot from the fourth quarter. This included another record quarter at $231.2 million, a 48% increase compared to the same time last year.
As for the next year, annual revenue is projected to be between $950 and $970 million. This would be a 25% increase from 2023 levels. Annual adjusted EBITDA would be between $125 and $130 million. This would be a 15% increase as well.
Again, investors were likely hoping for more. And they were also likely not so pleased that the company is still expanding while trying to manage its debts. Other companies have gone through these issues in the past and made major cuts in the process.
Yet it seems that WELL stock is just now coming around to these cuts. Perhaps hoping for more growth, perhaps hoping for interest rates to come down. Who knows. But now, cuts are coming in. And until it can demonstrate those cuts are really working, with a move to profitability, it’s unlikely shares will recover quickly.
Will they recover at all?
What I still like about WELL stock is that the company makes sense. It has expanded into virtual healthcare after providing electronic medical filing systems. These have expanded from hospitals to doctors offices. And while it would be logical to think that after the pandemic everyone would return to in-person visits, that hasn’t been the case.
The bottom line is that when it comes to investing in a business, it should be one that any idiot could run, as Warren Buffett has said. WELL stock is almost there. After bringing down debt, the company will have expanded to a level that will continue to see organic growth climb almost indefinitely. And that’s why I would still recommend researching the stock, especially at these levels.
