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R1 RCM can extend this year’s rally following an uptick in product use, Bank of America said. Analyst Michael Cherny reiterated his buy rating and raised his price target by $3 to $22. His new price target implies the medical billing stock could rally 31.1% over the next year. Challenges related to customer issues, long payer cycles and management changes all weighed on the stock at the end of 2022, but these conditions have started mitigating, he said. The stock finished 2022 down 57%, its first year ending lower since 2016. Shares have surged 53.2% since the start of 2023. RCM YTD mountain R1 RCM, year-to-date “We think this all sets RCM up to get back on its previous growth track – call it a delay in realization vs. a full derailment of the story,” Cherny said in a note to clients Friday. He noted the company has acknowledged progress is being made on the go-live process and the pay cycle. There’s also new leadership in place, with CEO Lee Rivas and CFO Jennifer Williams at the helm, he said. The company is uniquely well-positioned for an uptick in utilization, which could cushion year-end results and full-year guidance, according to the analyst. He explained that RCM’s revenue model is tied to when it collects from different hospital systems, and an uptick in first-quarter product use could lead to a bump in net operating fees not seen until later quarters. That gives upside potential to the stock. Shares could also be helped by improving implementation among core customers, growth and synergy in the medical cloud space and if any new customers are obtained, he said. The new multiple of price to enterprise-value-to-EBITDA is still reasonable and at a discount to the long-term average, Cherny noted. — CNBC’s Michael Bloom contributed to this report.
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