On Wednesday, RBC Capital Markets adjusted its outlook on GoHealth Inc. (NASDAQ: GOCO), reducing the company's stock price target to $13 from the previous $20 while retaining a Sector Perform rating. This revision follows a review of the company's fourth-quarter financial performance for 2023, which did not meet expectations due to a decline in submissions.
The company experienced a drop in volume largely attributed to a decrease in plan switchers, which was influenced by a lack of significant differentiation among Medicare Advantage (MA) products.
The update provided by RBC Capital comes after an initial note on the previous Tuesday, in which the firm shared preliminary thoughts on GoHealth's quarterly results. In the latest communication, the analyst stated that the new valuation approach is based on an earnings multiple. This change reflects a strategic shift from the previous valuation methodology.
RBC Capital's revised valuation now incorporates a target enterprise multiple of 10 times the adjusted EBITDA estimate for GoHealth in 2024. The decision to maintain the Sector Perform rating indicates that the firm's outlook on GoHealth's stock remains neutral, despite the reduced price target.
GoHealth's performance in the fourth quarter of 2023 was notably below the market's expectations, leading to the updated assessment by RBC Capital. The company's challenges during the quarter were primarily due to the aforementioned lower submission volumes and the competitive landscape within the Medicare Advantage market.
The new stock price target of $13 represents a significant adjustment and is based on the firm's updated financial model for GoHealth. This adjustment is indicative of the recalibrated expectations for the company's future earnings potential and market performance.
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