Lake Street Capital Markets has adjusted its price target on ModivCare Inc. (NASDAQ: MODV), a provider of healthcare services, reducing it to $30.00 from the previous $50.00.
Despite this change, the firm maintained its Buy rating on the company's stock. This adjustment comes after ModivCare reported challenges in collecting a significant portion of its receivables and revised its earnings guidance.
Last Thursday, ModivCare disclosed through a Form S-3 shelf registration and a Form 8-K that it faced difficulties in the timely collection of around $60 million of its $159.3 million in current contract receivables from its Non-Emergency Medical Transportation (NEMT) segment.
These receivables were primarily from Managed Care Organization (MCO) customers as of June 30. The company attributed the delays to the effects of Medicaid redeterminations and increased utilization under its shared-risk contracts.
As a result of these collection issues, ModivCare's management has lowered its Adjusted EBITDA (AEBITDA) forecast for the year 2024. Additionally, the company has set new guidance, anticipating a 10% growth in AEBITDA in 2025 from the revised lower level in 2024. ModivCare is optimistic that it will begin 2025 with well-aligned prepayment rates and expects the current challenges to subside as utilization patterns stabilize.
Lake Street Capital Markets noted that ModivCare's stock has taken a significant hit, but suggested that the market reaction might be more severe than warranted. The analyst firm pointed out that ModivCare operates in large markets with substantial unmet needs and does not foresee the company issuing additional equity at this time.
In other recent news, ModivCare reported its financial results for the second quarter of 2024. The healthcare services provider announced an adjusted EBITDA of $45 million and revenue of $698 million, which remained unchanged compared to the previous year.
Despite growth in the non-emergency medical transportation (NEMT) segment, the company experienced a net loss of $129 million, largely due to a $105 million goodwill impairment in the remote patient monitoring (RPM) segment.
ModivCare reaffirmed its full-year 2024 revenue guidance of $2.7 billion to $2.9 billion, while adjusting its EBITDA guidance to $185 million to $195 million. The company remains focused on deleveraging its balance sheet and optimizing operations to achieve a leverage ratio of 3 times.
InvestingPro Insights
ModivCare Inc. (NASDAQ: MODV) has been navigating a turbulent financial landscape, reflected by its recent stock performance and the adjustments in its earnings guidance. To provide a comprehensive view, InvestingPro data indicates a market capitalization of $181.14M, suggesting a relatively small player in the healthcare services market. The company's P/E ratio stands at -1.1, highlighting current profitability challenges, and the Price / Book ratio is at 19.04, which may raise questions about the company's valuation relative to its assets.
In light of these challenges, InvestingPro Tips reveal that ModivCare operates with a significant debt burden and is quickly burning through cash, which aligns with the concerns raised by Lake Street Capital Markets about the company's receivables and debt management. However, there is a silver lining as analysts expect net income growth this year, and the Relative Strength Index (RSI) suggests the stock is currently in oversold territory, potentially indicating a buying opportunity for investors.
For those looking to delve deeper into ModivCare's financials and future outlook, InvestingPro offers 16 additional tips to aid in investment decisions. As ModivCare anticipates a rebound in 2025, these insights can be crucial for investors considering the company's long-term potential amid current headwinds.
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