CareCloud stock target raised, holds buy rating on cost-cutting plan

On Tuesday, CareCloud (NASDAQ:CCLD) received an updated stock price target from Benchmark, increasing it to $4.50 from the previous $4.00, while the firm maintained a Buy rating on the stock. This adjustment comes in light of CareCloud's reported progress in profitability and financial management, as well as future plans for cost reductions and product growth.

CareCloud, in the second quarter, showed a significant uptick in its financial performance with a 67% rise in adjusted EBITDA. The company also reported an increase in free cash flow (FCF) and a reduction in its credit facility balance, which has decreased from $10 million to $2.5 million year-to-date.

Looking ahead, the company has outlined a strategy to cut in-year expenses by $20 million, a plan that was initiated in the fourth quarter of 2023, aiming for approximately $26 million in annualized cost savings.

The healthcare technology firm also intends to restart the payment of preferred dividends, which were halted in December, once its free cash flow consistently surpasses the dividend requirements for a period of several months. Despite current challenges in revenue growth, primarily due to a slow recovery at its medSR division, CareCloud anticipates a stable sequential revenue trend for the rest of the year.

For the future, the company expects revenue momentum to pick up in 2025, with the medSR headwinds expected to subside and the anticipated interest in new product offerings. CareCloud is preparing to launch an ambient AI clinical documentation product and is looking to expand its Wellness chronic care and remote patient monitoring (RPM) solutions. These initiatives are projected to contribute to revenue growth.

In light of these developments and the greater-than-expected benefits from cost-saving measures, Benchmark has revised its adjusted EBITDA estimates for CareCloud for 2024 and 2025. The improved earnings outlook is the primary driver behind the raised price target for the company's shares.

In other recent news, CareCloud, a healthcare technology firm, has released its second quarter 2024 financial results, highlighting a 154% year-over-year increase in revenue from its CareCloud Wellness program. The company's recent launch of CareCloud CirrusAI notes, an AI-driven product to enhance clinical documentation, is now available for licensing and is projected to contribute to future revenue growth.

Despite a minor decrease in quarterly revenue, CareCloud reported a robust financial turnaround with second quarter revenues reaching $28.1 million and a significant reduction in expenses anticipated for 2024.

The company also reported positive GAAP net income for the first time since 2022, with $8.3 million in cash from operations and $4.9 million in free cash flow. CareCloud's strategic cost reduction measures have identified $26 million in annualized savings, and the company has repaid 75% of its credit line balance, improving financial flexibility.

In terms of future expectations, CareCloud anticipates significant growth in adoption and revenue from the CareCloud CirrusAI notes offering, and is working towards eliminating its credit line balance and resuming preferred dividends.

The company's growth strategies include expanding wallet share with existing customers, exploring partnerships, and leveraging technology-enabled RCM solutions. Analysts from various firms have noted these recent developments as indicative of a promising trajectory for CareCloud.

InvestingPro Insights

Following the recent positive outlook from Benchmark, InvestingPro data and tips provide additional insights into CareCloud's financial health and market performance. The company's aggressive share buyback program, as noted in one of the InvestingPro Tips, signals management's confidence in the company's value. Moreover, the expectation of net income growth this year and upward earnings revisions by analysts further support the optimism surrounding CareCloud's profitability prospects.

From a valuation perspective, CareCloud's strong free cash flow yield and low revenue valuation multiple suggest that the stock could be undervalued relative to its cash-generating ability and sales figures. This is underscored by the company's market capitalization of $46.21 million and a price-to-book ratio of just over unity at 1.07, as of the last twelve months leading up to Q2 2024.

Despite a revenue decline of 11.04% in the same period, the InvestingPro Tips highlight a high shareholder yield and a significant price increase of 96.55% over the last six months, which may capture investor interest.

For those considering an investment in CareCloud, it's worth noting that the company has achieved a strong return over the last month and year, with price total returns of 26.67% and 74.85% respectively. These figures, combined with the analyst prediction of profitability this year, could make CareCloud an intriguing option for investors seeking growth opportunities. For more detailed analysis and additional tips, there are 11 more InvestingPro Tips available for CareCloud at https://www.investing.com/pro/CCLD.

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