On Wednesday, Canaccord Genuity Capital Markets downgraded and cut their price target on CloudMD (TSXV: DOC), saying that their forecast is now shrouded by multiple challenges. The analysts downgraded the stock to a hold rating from a speculative buy rating while slashing their 12-month price target to C$0.45 from C$1.50.
In the news release CloudMD filed on August 17, they provide a business update on “customer momentum.” They say that during the second quarter, the company won several multi-year contracts worth $4.2 million annually. These contracts include a U.S insurance company, transport manufacturer, telecommunications provider and a financial service firm.
Additionally, the company announced that it won a TAiCBT Ontario Government Contract, which is a two-year contract while the program is expected to expand over time, while at the same time, noting that the government is currently winding down its two-year COVID Response Program. As a result, CloudMD says that they are “in the process of eliminating the direct delivery costs associated with providing the services, as well as identifying further cost synergies to offset the gross contribution from the contract.”
CloudMD currently has five analysts covering the stock with an average 12-month price target of C$1.33, or an upside of 237%. Out of the five analysts, four have to buy ratings, while the last analyst has a hold rating on the stock. The street high price target of C$2.25 is an upside of 470%.
In Canaccord’s note, they say that the business update “suggests that the revenue run-rate from this relationship will decline 85%,” which amounts to a $10 million revenue hit. Though the company is currently in the process of eliminating related direct delivery costs, Canaccord expects that this news will “have a significant impact on CloudMD’s quest to achieve breakeven.”
They say that this news has added uncertainty, which when added on top of the other announced issues around their VisionPros acqusition has made the analyst downgrade and lower their price target for the company.
ClouldMD is expected to report its second quarter on Monday, August 22. Canaccord is expecting revenues to come in at $42.4 million while adjusted EBITDA is expected to come in at -$0.9 million.
Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.