AdaptHealth (AHCO – Research Report), the Healthcare sector company, was revisited by a Wall Street analyst yesterday. Analyst Joanna Gajuk from Bank of America Securities reiterated a Sell rating on the stock and has a $7.00 price target.
Joanna Gajuk’s rating is based on a careful analysis of AdaptHealth’s financial outlook and operational challenges. Despite a stronger than anticipated performance in the first quarter, with EBITDA exceeding guidance by $21 million, Gajuk remains cautious due to the unchanged yearly revenue and EBITDA guidance which takes into account a weaker second quarter. The anticipation of higher costs resulting from the Change outage and increased expenses for sleep supplies, which are expected to normalize in the second half of the year, contribute to the decision to maintain an Underperform rating. Gajuk awaits more consistent performance from AdaptHealth and greater clarity on its long-term growth potential before reconsidering the stock’s rating.
Additionally, the report indicates that the second quarter’s revenue growth is projected to be a mere 1% year over year, due to challenging comparisons and only a slight increase in diabetes revenue, despite better performance in continuous glucose monitor (CGM) sales. The impact of the Change systems outage leading to manual processing and inefficiencies, coupled with a slowdown in the distribution of sleep supplies due to external disruptions, suggests a softer second quarter than initially expected. While Gajuk acknowledges the company’s confidence in its free cash flow outlook for the year and its efforts in repaying debt, these positive notes are not sufficient to offset the near-term concerns, thus leading to the Sell rating.
AHCO’s price has also changed moderately for the past six months – from $7.690 to $9.760, which is a 26.92% increase.
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AdaptHealth (AHCO) Company Description:
AdaptHealth Corp. provides medical products for both rental and sale. It focuses on respiratory and/or mobility equipment, including CPAP sleep equipment, oxygen equipment, wheelchairs, walkers, and hospital beds. The company was founded in 2012 and is headquartered in Plymouth Meeting, PA.
