On Wednesday, Piper Sandler adjusted its outlook on Multiplan Co. (NYSE: MPLN), reducing the price target significantly to $10 from the previous $40 while maintaining a Neutral rating on the stock. The adjustment follows Multiplan's announcement of lowered guidance for the calendar year 2024 (CY24), which was in line with the company's third-quarter results for 2024.
The firm noted that expected revenue attrition could negatively impact Multiplan's revenue growth in calendar year 2025 (CY25). The analyst expressed concerns regarding several challenges that the company may face, including regulatory, competitive, and liquidity risks. These factors contributed to the decision to maintain a Neutral stance on the company's shares.
Piper Sandler's revised price target is now based on an 8.0 times multiple of the company's projected adjusted EBITDA for calendar year 2026 (CY26E), a slight decrease from the previously used 8.4 times multiple of CY25E adjusted EBITDA. The adjustment reflects the firm's recalibrated expectations for Multiplan's financial performance in the coming years.
The analyst's commentary highlighted the reasoning behind the lowered guidance and price target adjustment, stating, "MPLN lowered CY24 guidance on an in-line 3Q24 print. We expect attrition to undermine revenue growth in CY25 and do not believe fundamentals justify investment given the regulatory, competitive and liquidity risks. Neutral, PT to $10 (prior $40) based on an 8.0x (prior 8.4x) multiple of CY26E (prior CY25E) adjusted EBITDA."
In other recent news, MultiPlan Corporation has seen several significant developments. The company recently appointed Tiffani Misencik as Chief Growth Officer, a role that will focus on driving sales and revenue growth strategies. This move is part of MultiPlan's strategic growth ambitions, with Misencik bringing over 25 years of healthcare technology experience to the role.
Additionally, MultiPlan's Q2 2024 results revealed a 1.9% year-over-year revenue decrease to $233.5 million, despite an 8% increase in sales and double-digit growth in its pipeline. The company also reported an expected $30 million challenge to revenue in fiscal year 2025 due to an attrition event. However, MultiPlan's long-term growth rate target of 8-10% remains unchanged, though delayed.
In response to these earnings, both Citi and Piper Sandler adjusted their price targets for MultiPlan. Citi reduced its price target to $10 from $17.20, while Piper Sandler cut its price target to $1 from $2. These adjustments followed the company's Q2 2024 earnings, which fell below consensus estimates, prompting a downward revision of the full-year guidance.
Finally, Doug Garis has succeeded Jim Head as the Chief Financial Officer of MultiPlan. As part of its strategic shift, MultiPlan is transitioning towards a data and technology-focused approach, with new products Plan Optics and BenInsights successfully sold. The company also revised its full-year 2024 revenue guidance to between $935 million and $955 million.
InvestingPro Insights
The recent analysis by Piper Sandler aligns with several InvestingPro metrics and tips for Multiplan Co. (NYSE: MPLN). InvestingPro data shows that MPLN's stock has taken a significant hit, with a 47.67% price decline over the last three months and an 86.28% drop over the past year. This downward trend supports Piper Sandler's decision to lower the price target.
An InvestingPro Tip indicates that management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's long-term prospects despite current challenges. However, another tip warns that analysts do not anticipate the company will be profitable this year, echoing Piper Sandler's concerns about revenue attrition and growth challenges.
The company's valuation metrics provide a mixed picture. While MPLN is trading at a high EBIT valuation multiple, its Price to Book ratio of 0.66 suggests the stock might be undervalued. This complex valuation scenario aligns with Piper Sandler's neutral stance on the stock.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for MPLN, providing a deeper understanding of the company's financial health and market position.
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