Tuesday, Stifel adjusted the stock price target for DocGo (NASDAQ: DCGO) shares, lowering it to $6.50 from the previous target of $8.00, while continuing to recommend a Buy rating for the stock. The revision follows the non-renewal of a key asylee support contract with Housing Preservation & Development and uncertainties surrounding services provided to other agencies, including NYC Health and Hospitals.
The analyst at Stifel noted that the contracts had become highly politicized and controversial, which may dilute management's focus on growing strategic areas of the business. The firm also stated that there is limited visibility on how the relationships and contracts with these agencies will conclude, including whether they will terminate and the potential impact on revenue and earnings.
Stifel revised its financial estimates for DocGo, expecting these contracts to wind down in the second half of 2024 and to stop contributing to revenue by 2025. The firm's adjusted forecasts for 2024 are now set at $611 million in revenue and $40 million in EBITDA, down from $687 million and $60 million, respectively. For 2025, the estimates have been adjusted to $382 million in revenue and $33 million in EBITDA, a decrease from the previously projected $683 million in revenue and $65 million in EBITDA.
The new 12-month price target of $6.50 is based on approximately 14 times the estimated EBITDA for 2025. The next quarterly report, which may provide further guidance, is expected to be released on May 8, 2024.
InvestingPro Insights
In light of Stifel's recent price target adjustment for DocGo, real-time data and insights from InvestingPro offer additional context for investors considering the stock. With a market capitalization of $369.35 million and a high P/E ratio standing at 54.55, DocGo is trading at a significant earnings multiple.
Despite this, analysts have revised their earnings downwards for the upcoming period, reflecting some caution in expectations. The company's revenue growth has been impressive, with a 41.72% increase over the last twelve months as of Q1 2023, and an even more substantial quarterly growth of 83.16% in Q1 2023. This growth narrative is further supported by a robust gross profit margin of 31.3%.
InvestingPro Tips for DocGo suggest that while the company is expected to be profitable this year, it is also quickly burning through cash. These insights might be crucial for investors considering the potential impact of the non-renewal of key contracts on the company's financial health.
Moreover, with analysts predicting profitability and a moderate level of debt, the financial outlook for DocGo presents a mix of opportunities and risks. It is important to note that DocGo does not pay a dividend, which may influence the investment strategy of income-focused shareholders.
For those looking to delve deeper into the financials and forecasts for DocGo, InvestingPro offers further tips and insights. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and find out more about the total of seven additional InvestingPro Tips available for DocGo at: https://www.investing.com/pro/DCGO.
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