Cano Health (NYSE:CANO), a healthcare provider, saw its shares plummet by more than 44% premarket after the company issued a going concern warning and announced that it is exploring a potential sale.
Cano Health revealed that it currently lacks sufficient liquidity to cover its operating, investing, and financing needs for the next 12 months.
“Management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year,” Cano Health said in a statement.
Cano Health said that total revenue for its second quarter amounted to $766.7 million, falling short of the estimated $829M. The adjusted EBITDA showed a loss of $149.7M, in contrast to the projected profit of $12M.
The company reported a loss per share of $0.51, much worse than the expected $0.40 loss.
Cano Health intends to exit operations in California, New Mexico, and Illinois by the fall, and in Puerto Rico by January 1, 2024. The company also expects to reduce its workforce by approximately 700 employees.
Cano also withdrew its guidance for the fiscal year 2023 but anticipates that its performance will improve in the second half of the year. Cano Health also revealed that its restructuring efforts are expected to yield approximately $50M in annualized cost reductions starting in the third quarter of 2023 until the end of 2024.
Citi analysts downgraded the stock to Neutral from Buy with a price target cut by 80% to $0.80 per share.
“We continue to believe there is inherent value in CANO’s high-touch, VBC-centric approach to managing underserved populations. But with unfavorable trend development over recent quarters, solvency concerns, a difficult MA backdrop in 2024, and a host of initiatives to juggle in an effort to shore up operations, it is difficult to maintain a more positive stance at this juncture,” the analysts said.
BofA analysts cut the price target to $1.00 per share on the Underperform-rated stock.
“We are cutting our forward estimates and PO (now 19x 2024E EBITDA VS 25x 2023E previously) on the loss in confidence and reiterate our underperform rating.”