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On Friday, Deutsche Bank (ETR:DBKGn) downgraded DocGo stock (NASDAQ:DCGO) from ’Buy’ to ’Hold,’ significantly reducing the price target to $2.85 from the previous $5.00. The stock, which has declined over 18% in the past week and currently trades at $3.92, maintains a "GREAT" overall financial health score according to InvestingPro analysis. The adjustment in the stock’s outlook was prompted by the company’s decision to invest in transitioning to care gap closure, which led to a revised 2025 EBITDA estimate of $21 million, down from the earlier projection of $40 million.
The rationale behind the new price target is based on an 8x 2025 EBITDA multiple, which has been chosen due to the uncertainties surrounding the company’s business model transition and its impact on future margins. The company currently trades at an EV/EBITDA multiple of 7.96x, with a P/E ratio of 13.4x. Deutsche Bank’s analysis indicates that while there is potential upside to the stock, it is counterbalanced by significant execution risks associated with the shift in DocGo’s base business and margin projections. According to InvestingPro’s Fair Value analysis, the stock appears to be undervalued at current levels, with additional insights available in the comprehensive Pro Research Report.
Deutsche Bank’s revised valuation reflects a more conservative near-term multiple, deeming 8x to be a fair assessment given the current circumstances. The bank’s stance is influenced by the lack of visibility into DocGo’s operational transition and its effects on the company’s financial performance.
The bank also noted that if DocGo’s management can successfully achieve its ambitious margin ramp in the second half of the year, there may be a possibility for a more positive reassessment of the stock. However, Deutsche Bank emphasized the need for tangible evidence that DocGo’s new business model is yielding the expected results before they can adopt a more optimistic perspective on the stock’s value.
In other recent news, DocGo Inc. reported its fourth-quarter 2024 earnings, highlighting a significant decline in revenue. The company posted a quarterly revenue of $120.8 million, which fell short of the $124.26 million forecast, marking a 39% year-over-year decrease. DocGo also reported a net loss of $7.6 million for the quarter, contrasting with a net income of $8 million in Q4 2023. Despite these challenges, the full-year 2024 results showed a 34% increase in net income to $13.4 million, with adjusted EBITDA rising by 12% to $60.3 million.
In other developments, Cantor Fitzgerald revised its price target for DocGo, lowering it to $4.00 from $5.00, due to concerns over the timing of the company’s EBITDA margin cut for 2025 and a revenue shortfall reported in Q4 2024. The firm, however, maintained an Overweight rating on the stock, expressing confidence in DocGo’s management and strategic investments. Looking ahead, DocGo has provided revenue guidance for 2025, targeting between $410 million and $450 million, with a focus on expanding its Care Gap Closure Program. The company aims for 15% annual revenue growth in its transportation segment and anticipates mid-single-digit EBITDA margins.
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