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On Wednesday, TD Cowen analyst Charles Rhyee downgraded shares of DarioHealth Corp. (NASDAQ: NASDAQ:DRIO), shifting the rating from Buy to Hold. The price target was also halved, moving from $2.00 to $1.00. Rhyee’s decision reflects concerns over the digital health company’s revenue growth trajectory and the extended timeline anticipated for reaching breakeven. The company, currently valued at $26.35 million, has seen its stock decline by 8.59% in the past week alone. According to InvestingPro data, DarioHealth is quickly burning through cash, raising concerns about its financial sustainability.
The downgrade comes as DarioHealth faces a challenging demand environment within the digital health sector. Rhyee noted that limited investment by the company, due to a focus on cost management, is likely to apply pressure on revenue growth. This situation is compounded by muted growth in the business-to-business-to-consumer (B2B2C) segment throughout 2024. Recent financial data shows the company’s revenue declined by 2.09% in the last twelve months, with an EBITDA of -$53.97 million, highlighting the operational challenges ahead.
Additionally, the analyst pointed out that there may be limited visibility into the company’s strategic partnerships. According to Rhyee, these partnerships are on track to generate zero revenue in 2024, which further contributes to the cautious outlook on the stock.
DarioHealth, which specializes in digital health solutions, has been navigating a period of uncertainty as it attempts to adapt to market conditions and establish sustainable growth patterns. The TD Cowen analyst’s comments underscore the challenges the company faces in achieving its financial targets.
Investors are advised to monitor DarioHealth’s performance closely, especially regarding its strategic partnerships and B2B2C growth, which are critical to the company’s success. The lowered price target to $1.00 from the previous $2.00 is indicative of the revised expectations for the company’s financial performance in the near term. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this and 1,400+ other US stocks.
In other recent news, DarioHealth Corp reported robust growth in its Q3 2024 earnings call, with a revenue increase of 18.7% from the previous quarter, reaching $7.42 million. This figure also marks a 111% increase year-over-year, primarily driven by its Business-to-Business-to-Consumer (B2B2C) business segment. In parallel, the company managed to reduce non-GAAP operating expenses to $12.3 million, a 15.9% decrease from the previous quarter.
DarioHealth also announced the successful addition of four new contracts with self-insured employers, set to activate in the first quarter of 2025. This is part of the company’s B2B2C channel expansion, which is expected to contribute to near-term growth, improve gross margins, and expand the user base.
In the same vein, DarioHealth’s annual meeting of stockholders resulted in the election of six directors to the company’s board and the ratification of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, as its independent auditors for the upcoming fiscal year.
Despite facing challenges, analysts maintain a Strong Buy recommendation for DarioHealth, indicating potential upside. These are among the recent developments that are expected to influence the company’s direction for the next year.
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