On Wednesday, Stifel, a financial services firm, adjusted its stance on DocGo (NASDAQ:DCGO), a mobile health services provider. The firm lowered the price target on the company's shares to $8 from the previous $11 while maintaining a Buy rating.
This change comes in response to a recent development reported by Politico regarding the Health + Hospitals Corporation (HPD), which is transitioning the management of its New York City Metro area sites to another vendor. Moreover, HPD will seek competitive bids for sites outside the NYC metro area.
The analyst from Stifel remarked that the HPD contract has been a contentious issue and has cast a shadow over the company's operations. However, they believe the resolution of this contract could be beneficial in the long term. Due to the unclear timing of this transition, Stifel has revised its financial projections for DocGo, anticipating a significant decrease in HPD revenue.
It is expected to drop from approximately $20 million per month to around $5 million per month by the contract anniversary on May 5, 2024, and there will be no revenue contribution from HPD in 2025.
The firm also anticipates a reset in margins in 2024, which should start to grow again in 2025, although visibility into this is low. Stifel further projects a 20% growth in mobile services excluding HPD and a low-teens percentage increase in the transportation segment.
Consequently, the firm has reduced its EBITDA estimates for 2024 and 2025 by 25% and 34%, respectively, setting them at $60 million and $65 million.
DocGo's stock experienced a modest decline in morning trading, indicating that the market had largely anticipated these revisions. The stock is currently trading at 6 times Stifel's revised 2025 EBITDA estimate. The updated 12-month price target of $8 corresponds to 12 times the estimated EBITDA for 2025, as per the analyst's report.
InvestingPro Insights
In light of Stifel's recent adjustments to DocGo's financial outlook, it's valuable to consider additional insights from InvestingPro. DocGo's market capitalization stands at $329.18 million, reflecting the company's size and market value.
Despite the challenges highlighted, DocGo has shown a strong revenue growth of 41.72% over the last twelve months as of Q4 2023, with an even more impressive quarterly revenue growth of 83.16% in Q4 2023. This growth trajectory suggests a potential for resilience and recovery.
InvestingPro Tips indicate that analysts expect net income growth this year for DocGo, which could signal an optimistic future despite the current hurdles. Moreover, the company has demonstrated a strong return over the last three months with a 26.42% price total return, hinting at investor confidence in its short-term performance. Still, it is worth noting that DocGo is quickly burning through cash and operates with a moderate level of debt, factors that investors should watch closely.
For those seeking a deeper analysis, InvestingPro offers additional tips, including insights on earnings revisions and valuation multiples. With these additional insights, investors can make more informed decisions. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available for DocGo, which could further guide investment choices.
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