What happened

Shares of LifeStance Health Group (LFST 0.95%) were up 26% Wednesday morning after the healthcare company released its fourth-quarter earnings report. The jump probably had more to do with the company's guidance for 2023 than its earnings. LifeStance offers in-person and online mental healthcare services, using psychiatrists, advanced practice nurses, psychologists, and therapists across 34 states, in 600 centers.

So what

LifeStance and other businesses specializing in mental healthcare have been helped by the tailwind of the increased emphasis on mental health since the pandemic began. Unfortunately, a shortage of mental health professionals and a tight labor market have made it difficult for LifeStance to grow. The best news in the company's fourth-quarter and full-year earnings report is that it was able to add 200 clinicians in the fourth quarter and now has a total of 5,631, up 18% over 2022.

LifeStance is still losing money. It posted a net loss of $46.7 million for the quarter and $215.6 million for the year. However, its losses narrowed 56% and 30%, respectively, and its annual revenue took a 29% leap forward in 2022 to $859.5 million. LifeStance also released 2023 guidance of between $980 million and $1.02 billion, representing a rise of between 14% and 18.6%.

Now what

The stock is still a lot closer to its 52-week low of $4.22 than its 52-week high of $11.25. Investors will want to see continued progress toward profitability. The COVID-19 pandemic put an increased emphasis on the need for mental healthcare, and that trend is continuing as more employers provide such services as a benefit to their employees. One report, by Prophecy Market Insights, said mental health spending was $381.98 billion in 2020 and, with a compound annual growth rate of 3.4%, is expected to reach a market of $527.44 billion by 2030.