Looking for improved earnings from Canadian digital health solutions provider CloudMD Software & Services (CloudMD Software & Services Stock Quote, Charts, News, Analysts, Financials TSXV:DOC), according to Laurentian Bank Securities analyst Nick Agostino, who provided a quarterly preview on Thursday where he retained a “Speculative Buy” rating on the stock.
Vancouver-based CloudMD provides medical services supported by a digital technology suite, with its two segments being Digital Services and Enterprise Health Solutions.
The stock is down significantly over the past two years, going from a high of $3.00 in early 2021 to now the $0.18-$0.25 range where it’s been trading so far in 2023.
Agostino sees upside, however, and has reiterated a 12-month target price of $0.60, which at press time would represent a projected return of 216 per cent.
CloudMD is set to report its first quarter 2023 financials on May 29 after market close, with Agostino modelling total revenues from continuing operations at $27.4 million, which would represent a 13 per cent year-over-year decline. The analyst is expecting about six per cent organic growth sequentially.
By segment, Agostino is calling for $6.2 million in Digital Health Solutions revenue and $21.2 million in Enterprise Health Solutions.
“We look for Enterprise Health Solutions (EHS) revenue to be $21.2 million, down ~19 per cent year-over-year which includes a ~$2 million lower year-over-year run rate at MindBeacon from completed contracts along with the impact from the conclusion of one-time mandates including COVID-19 testing contracts in the prior year, partially offset by new Ontario Health multi-year contracts,” Agostino wrote.
On earnings, the analyst is calling for an adjusted EBITDA loss of $2.1 million, which would be a sequential improvement, reflecting continued cost optimization efforts on DOC’s part. Gross margins are expected to be flat sequentially at 35.0 per cent and reflective of a better sales mix and improvement in service delivery costs and improvement in iCBT gross margins in the Employee Assistance Program market in both Canada and the US, according to Agostino.
“As noted on the Q4 call, DOC has started actioning an additional $4 million in annualized cost savings starting in Q2/23 along with $1 million in Q1/23; the latter should benefit Q1 as well. We continue to expect positive EBITDA by Q4/23. We estimate opex as a percentage of sales at ~43 per cent versus ~45 per cent sequentially,” he wrote.
For the full 2023, Agostino is modelling sales of $115.0 million and EBITDA of negative $4.6 million.
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