On Thursday, BofA Securities adjusted its stance on Privia Health Group Inc (NASDAQ:PRVA), downgrading the stock from Buy to Neutral and reducing the price target to $21 from $27. The revision comes as the firm reevaluates the expected EBITDA growth for the healthcare company.
The downgrade was prompted by a reassessment of Privia Health's long-term EBITDA growth potential. BofA Securities now anticipates a 20% increase in EBITDA for 2023, a revision from the previously forecasted 30%-40% growth. This expectation adjustment is primarily due to the performance of the company's value-based care (VBC) segment, which has not met initial expectations.
According to the BofA Securities analyst, the underperformance is largely attributed to delays in the VBC segment, which are expected to last an additional one to two years because of utilization and coding pressures. This setback has prompted the firm to revise its projections and price objective for Privia Health.
The new price objective of $21 is based on a multiple of 23 times the firm's revised 2025 EBITDA estimate for Privia Health. This estimate now falls below the consensus, signaling a more conservative outlook on the company's financial trajectory.
InvestingPro Insights
Amid the reassessment by BofA Securities, Privia Health Group Inc (NASDAQ:PRVA) is navigating the financial landscape with some notable strengths and challenges. The company is currently trading at a price that is significantly below the average analyst target. According to real-time metrics from InvestingPro, the fair value as assessed by analysts stands at $30.5, whereas the InvestingPro fair value estimation is slightly lower at $22.37. This discrepancy suggests potential undervaluation, offering an interesting point for investors considering the company's future profitability as predicted by analysts.
InvestingPro Data reveals that Privia Health holds a market capitalization of $2.33 billion, and despite the downgrade, it has seen a robust revenue growth of 24.75% over the last twelve months as of Q3 2023. This growth is coupled with an EBITDA growth of 175.68% in the same period, which may indicate underlying operational efficiency gains despite the VBC segment's slower-than-expected performance. The P/E ratio stands at 62.04, which is high, but the PEG ratio of 0.34 suggests that the stock may be more reasonably priced when considering its earnings growth rate.
One of the key InvestingPro Tips for Privia Health is the company's financial stability, as it holds more cash than debt on its balance sheet. This tip is particularly relevant for investors looking for companies with lower financial risk. Another tip to consider is that two analysts have revised their earnings upwards for the upcoming period, hinting at optimism regarding Privia Health's earning potential despite recent setbacks.
For investors who find these insights compelling and wish to delve deeper into Privia Health's financials, additional InvestingPro Tips are available. There are 11 more tips listed in InvestingPro that can provide a comprehensive understanding of the company's financial health and future prospects. To access these insights and more, interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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