On Wednesday, Jefferies analyst Brian Tanquilut revised the price target for ModivCare (NASDAQ: MODV) significantly downward to $5.25 from the previous target of $18.00. The stock, currently trading at $5.42, has fallen nearly 86% over the past year and is trading near its 52-week low of $5.55. Despite this change, the firm chose to maintain a Hold rating on the company's shares. The adjustment follows the company's management reducing its fiscal year 2024 guidance, a move that signals ongoing fundamental challenges within the organization. According to InvestingPro, four analysts have recently revised their earnings expectations downward for the upcoming period.
Tanquilut's remarks highlighted ModivCare's current financial position, noting the company's high debt levels and its struggle to generate free cash flow (FCF). InvestingPro data reveals a concerning debt-to-capital ratio of 94% and negative free cash flow of -$95.5 million in the last twelve months. These factors, according to the analyst, are likely to result in the stock trading sideways at best, as it appears to now reflect only the option value.
The analyst further pointed out that ModivCare is facing execution risk due to ongoing changes to contract structures and client attrition. This situation underscores the difficulties the company is encountering in maintaining and expanding its client base while also adapting its business agreements to a changing market environment.
Tanquilut believes that any near-term (NT) share upside or value realization for ModivCare will depend solely on the sale of assets. This indicates that the company's performance and stock value may hinge on its ability to effectively divest certain assets.
ModivCare's reduced fiscal year 2024 guidance and the subsequent price target adjustment by Jefferies reflect the broader challenges the company is facing. As it navigates through these issues, ModivCare's stock rating remains on hold, with a significantly lowered expectation for its future share price. While InvestingPro analysis suggests the stock may be undervalued at current levels, investors should note that the company's current ratio of 0.8 indicates short-term obligations exceed liquid assets. Get access to 15+ additional ProTips and comprehensive financial analysis through InvestingPro's detailed research reports.
In other recent news, ModivCare Inc has been actively navigating through significant developments. The company announced its Q3 earnings, reporting $702 million in revenue and an adjusted EBITDA of $43 million. Despite a net loss of $27 million, ModivCare revised its adjusted EBITDA guidance for 2024 to between $170 million and $180 million. Looking ahead, the firm projects a 10% increase in adjusted EBITDA for 2025, driven by membership growth and new contracts.
ModivCare also underwent changes in its board, with two directors, Christopher S. Shackelton and Rahul Samant, stepping down. The vacancies were promptly filled by the appointment of Leslie V. Norwalk as the new Interim Chair of the Board and the addition of two new independent directors, Craig Barbarosh and Neal Goldman.
Furthermore, Lake Street Capital Markets reduced the price target for ModivCare shares to $10.00, a significant decrease from the previous $30.00 target, while reaffirming a Buy rating. This revision followed ModivCare's decision to withdraw its financial guidance for the years 2024 and 2025, citing changes in its business and the broader market environment.
Additionally, ModivCare secured $75 million in additional financing from some of its existing lenders and received a commitment from Coliseum Capital to invest $30 million. These recent developments reflect ModivCare's strategic positioning and operational efficiency as it continues to navigate the complex healthcare landscape.
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