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Monday, Stephens analysts adjusted their outlook on ModivCare (NASDAQ: MODV), reducing the price target to $3.50 from the previous $7.00 while maintaining an Equal Weight rating on the stock. The adjustment comes as the company’s shares trade near their 52-week low of $2.70, having fallen over 90% in the past year. According to InvestingPro data, the stock’s recent performance reflects significant market concerns, with shares down 76.7% year-to-date. The adjustment comes as ModivCare navigates a year of significant changes, including the strategic divestiture of its PCS and RPM segments and the transition of its Non-Emergency Medical (TASE:BLWV) Transportation (NEMT) payer contracts to fee-for-service (FFS) structures, moving away from shared-risk models.
The company has decided not to issue formal guidance for 2025 due to the complexity of these transitions. ModivCare aims to foster operational and financial stability by increasing the mix of FFS contracts and advancing its sales pipeline. This strategic shift comes as the company manages a substantial debt burden of $1.3 billion and operates with a concerning current ratio of 0.79, indicating potential liquidity challenges according to InvestingPro analysis. The FFS contracts are expected to account for approximately 25% of NEMT’s revenue mix, up from 16% in the previous year. These contracts also promise improved accounts receivable cycles of three months or less, compared to six to eighteen months under shared-risk contracts, while maintaining a similar margin profile.
ModivCare’s NEMT segment is set to experience attrition from two Managed Care Organization (MCO) contracts, which will result in a loss of approximately $200 million in annualized revenue starting in the first quarter of 2025. However, this will be partly mitigated by a new contract expected to bring in around $90 million in annualized revenue, which will be integrated throughout the year.
In light of these developments, Stephens analysts have revised their estimates and price target to reflect the anticipated impact on ModivCare’s financial performance. The revised price target of $3.50 takes into account the company’s strategic changes and the associated risks and opportunities. The Equal Weight rating suggests that the analysts view the stock as fairly valued at its current price, given the balance of potential upsides and downsides. For deeper insights into ModivCare’s valuation and financial health, investors can access comprehensive analysis and 15+ additional ProTips through InvestingPro’s detailed research reports, which provide expert analysis on over 1,400 US stocks.
In other recent news, ModivCare Inc. reported its fourth-quarter and full-year 2024 financial results, revealing significant misses on both earnings per share (EPS) and revenue forecasts. The company’s Q4 EPS was $0.19, falling short of the projected $0.76, while revenue was $702.8 million, below the anticipated $718.94 million. Despite these misses, the company’s stock rose by 5.65% in aftermarket trading, a reaction possibly influenced by strategic initiatives like the launch of new digital health services and AI technologies. ModivCare achieved $35 million in operational cost savings, which may have contributed to investor optimism. The full-year revenue reached $2.79 billion, marking a 1.1% increase from the previous year, although consolidated adjusted EBITDA declined by 20% to $161.1 million. The company did not provide formal fiscal 2025 guidance, focusing instead on strengthening its platforms and monetizing its services. Analysts from firms like Jefferies and Deutsche Bank (ETR:DBKGn) have shown interest in the company’s strategic adjustments, particularly in response to market challenges and Medicaid budget changes.
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