Shares of online mental healthcare provider Talkspace (NASDAQ: TALK) have soared 16% as of 3:30 p.m. ET Tuesday, according to data provided by S&P Global Market Intelligence.
The company announced a partnership with Amazon's health services unit, in a move it says aims to improve the discoverability of its services among the 145 million people who are covered by its benefits.
Management believes partnering with the world's second-largest retailer will help "customers discover, determine their eligibility for, and enroll in their Talkspace mental health benefits if they choose to do so."
Talkspace eyes further growth -- and profitability
While this potentially massive partnership is intriguing enough on its own merit, Talkspace's strong revenue growth and improving profitability over the last year have the market taking a more optimistic stance on the company's share price.
Growing payor and direct-to-enterprise revenue by 62% and 20%, respectively, the company extended its run of five consecutive quarters of double-digit or higher sales growth. Equally as important, though, Talkspace's net profit margin has steadily improved from negative 13% in the second quarter of 2023 to negative 1% in Q2 2024. Better yet, the company generated $3.4 million in free cash flow from $46 million in sales in its most recent quarter, as well.
These strengthening margins, paired with Talkspace's recent Amazon partnership, and its ongoing rollout of availability for Medicare coverage across all 50 states by year-end, show that the company's investment proposition is growing stronger.
While it is far too early to tell if Talkspace will be able to deliver persistent profitability or develop a competitive moat, these recent developments make the company worth monitoring for risk-tolerant investors. With $115 million in cash on hand and no debt, Talkspace should have ample funding to prove itself over the coming years.
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