Canaccord Genuity downgrades Kooth to 'speculative buy'
By Iain Gilbert
Date: Wednesday 28 Sep 2022
(Sharecast News) - Analysts at Canaccord Genuity downgraded digital mental health and wellbeing company Kooth from 'buy' to 'speculative buy' on Wednesday and slashed their target price on the stock from 380.0p to 240.0p, citing "lots of moving parts" in its investment case.
Canaccord Genuity pointed to the, hopefully, temporary slowdown in UK growth from ICS consolidation and continued modest cash burn from the ramp-up in US investment as concerns but did note that this had been somewhat countered by the potential for accelerating growth from the US - which management estimate offers a $26.0bn market opportunity.
However, although the Canadian bank stated that Kooth establishes the scale and readiness of the opportunity in the US, it had opted to lower its recommendation due to "evolving market dynamics".
"Having built the foundations in the US over the past year, Kooth has secured its first major contract win with the State of Pennsylvania. The 1-year pilot, worth $3m, will see the delivery of its platform to 30 school districts, with the opportunity to expand to >500 districts if successful," said Canaccord.
"This will be dependent on Kooth delivering against therapeutic and economic outcomes, with the first indications of this likely to be in spring 2023. We believe this will be key in establishing credibility within the US, and in converting future opportunities, where we understand Kooth is building a healthy pipeline with State Gov/Medicaid providers."
Reporting by Iain Gilbert at Sharecast.com
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