AI And Healthcare Expansion Will Unlock New Opportunities

Key Takeaways

• The acquisition of TrueLark and ongoing product enhancements are expected to accelerate innovation, increase automation, and boost revenue growth and margins.
  
• Expansion into new verticals and integrated workflows broadens Weave’s market, drives customer adoption, and supports long-term growth and profitability.
  
• Rising expenses, niche market concentration, integration risks, and slow cross-sell adoption threaten Weave's profitability, revenue growth, and ability to fend off larger tech competitors.

Catalysts

Provides a customer experience and payments software platform for small and medium-sized healthcare businesses in the United States and Canada.

• The acquisition of TrueLark, an AI-powered front desk automation platform, is expected to accelerate Weave’s product roadmap, drive rapid innovation in automated workflows, and open new cross-sell and upsell opportunities within Weave’s existing customer base—likely boosting both revenue growth and gross margins over time.
  
• Expansion into additional medical specialties, mid-market, and appointment-based professional verticals (beyond core dental and optometry, where penetration remains well below 15%, with some categories below 1%) greatly increases Weave’s addressable market and offers long-term runway for sustained customer and revenue growth.
  
• Strong integration with over 85 practice management systems and new integrations expanding the accessible market by 60,000 locations supports ongoing adoption by SMBs digitizing their workflows, which should drive higher customer stickiness, reduce churn, and support higher average revenue per user (ARPU), positively impacting net margins and lifetime value.
  
• Ongoing enhancements of embedded payments functionality—currently underpenetrated at less than 10% of revenue—combined with planned automation features (including those from TrueLark), are poised to increase product attach rates, improving monetization per customer and further supporting margin expansion and total revenue growth.
  
• Continuous prioritization of operational efficiency, evidenced by rising gross margins (up 170 basis points year-over-year to over 72%) and moderate free cash flow burn, positions Weave to benefit from increased SaaS spending prioritization by SMBs amid the secular migration to cloud-based, recurring-revenue models, supporting both improved earnings and future profitability.

Weave Communications Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Weave Communications's revenue will grow by 15.1% annually over the next 3 years.
• Analysts are not forecasting that Weave Communications will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Weave Communications's profit margin will increase from -14.1% to the average US Software industry of 13.2% in 3 years.
• If Weave Communications's profit margin were to converge on the industry average, you could expect earnings to reach $43.0 million (and earnings per share of $0.5) by about July 2028, up from $-30.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 35.8x on those 2028 earnings, up from -20.3x today. This future PE is lower than the current PE for the US Software industry at 42.7x.
• Analysts expect the number of shares outstanding to grow by 4.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.14%, as per the Simply Wall St company report.

Weave Communications Future Earnings Per Share Growth

Risks

• Heightened sales and marketing investment—including onboarding resources and expanded capacity for cross-selling TrueLark—suggests increased customer acquisition costs, which if not offset by materially higher revenue or lower churn could further pressure Weave’s already thin/nonexistent operating margins and delay the path to sustainable profitability or positive free cash flow.
  
• The company’s heavy reliance on healthcare-centric SMB verticals (dental, optometry, veterinary, specialty medical)—despite underpenetrated markets—means Weave’s growth remains tightly tethered to economic resilience in these sectors; any downturn or increased consolidation in the healthcare SMB space could materially impact future revenue streams and limit expansion potential.
  
• While the TrueLark acquisition promises to accelerate Weave’s AI roadmap, it introduces integration, execution, and product fit risk; if the combined platform fails to maintain differentiation against fast-moving, well-capitalized SaaS and AI incumbents (e.g., Salesforce, Microsoft, Google), Weave could see higher churn, pricing pressure, and difficulty expanding ARPU, negatively impacting net margins and top-line growth.
  
• Expanding R&D and integration investments—coupled with rising general and administrative expenses (including regulatory compliance like Sarbanes-Oxley)—may increase operating costs over time, especially as customer usage drives variable expenditures upward, compressing profit margins if monetization lags behind cost growth.
  
• The low attach rate (sub-10%) of high-growth products like Payments, despite management’s focus, highlights the risk that cross-sell/upsell strategies may take longer than planned to meaningfully expand ARPU, limiting revenue diversification and potential gross margin gains in the intermediate term.

Valuation

• The analysts have a consensus price target of $14.143 for Weave Communications based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $17.0, and the most bearish reporting a price target of just $11.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $324.8 million, earnings will come to $43.0 million, and it would be trading on a PE ratio of 35.8x, assuming you use a discount rate of 8.1%.
• Given the current share price of $8.11, the analyst price target of $14.14 is 42.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.