Cano Well being Inventory Falls 8% After Piper Sandler Downgrade to Underweight on Challenged Outlook By Investing.com

Piper Sandler analyst Jessica Tassan downgraded Cano Well being Inc (NYSE:) to Underweight from Impartial with a $5.00 per share value goal, down from $8.50.

Because of this, Cano inventory value is down about 8% heading into the New York open immediately.

Regardless of low cost relative valuation to friends, Tassan says he cannot suggest CANO shares to traders. Amongst different issues, the analyst notes that an FY22 capital allocation prioritizes income retention over development.

On the 4Q21 name, administration signaled that affiliate tuck-ins could be FY22 funding precedence #1. CANO will pare again FY22 de novo builds vs. 54-59 initially forecast. We consider this 12 months’s ramping investments in affiliate tuck-ins will draw consideration to CANOs apply of consolidating affiliate financials. As a result of associates are already consolidated, tuck-in M&A yields successfully no incremental membership, income or adjusted EBITDA. It’s an funding in retention, not development. “We don’t assume this dynamic is broadly appreciated, however count on heightened scrutiny in FY22,” Tassan mentioned in a shopper word.

Tassan estimates that owned suppliers generate 50% of CANO’s P&L, with the rest generated by affiliated suppliers.

He additional expects that owned suppliers will ship $1.72 billion of income in FY23E and $145 million of adjusted EBITDA.

General, the analyst says that the basic outlook is uniquely challenged, therefore the downgrade to Underweight.

By Senad Karaahmetovic