Happy Sunday, thought I’d make a post about DocGo $DCGO, which I bought a few weeks ago around .55 and is now .67. They have earnings tomorrow after hours and I’ll be following.
For those who aren’t familiar, DocGo is a medical services provider that does 3 things. 70% of their revenue is medical transportation (maybe you’ve seen their funny looking “Ambulnz” which does non emergency transportation to hospitals) and 30% is clinician at home visits (such as phlebotomy) and telehealth appointments (they acquired SteadyMD— a telehealth platform last year which is growing).
The stock has been a disaster since its SPAC IPO in 2021. The main reason for this is the former CEO Anthony Capone accepted a $400+ million no bid contract from the NYC Eric Adam’s administration to provide medical services to the migrant population, and they failed to deliver on this contract. They were accused of not providing the services, so basically the contract was viewed as a huge waste of taxpayer money and was terminated abruptly in 2023. This has created massive operating losses and goodwill impairments the last couple years and the stock has gone from a $1 billion market cap at ipo to $65 million today. In my opinion they were not ready to take on such a big contract at the size of company they were, and it was a mistake for their credibility even though they were able to be profitable from it.
You may be wondering why I’d be invested in this seeming disaster. It’s a fair question. There are a few reasons. First, now that the migrant contract disaster is history and all the losses from it realized, there is evidence that the 3 part core business I mentioned in the second paragraph is growing and going to turn profitable this year. They are guiding for around $310 million in revenue this year, and in the first quarter the $75 million they had was a 20% YOY increase.
The second reason is that they still have $60 million in cash and zero debt. I love this for a company with a market cap of $65 million and EV of $35 million. The big question is can they mitigate the cash burn that has been occurring. I think they can. While their revenue has been growing, they have still had losses because of high costs due to SGA from rapid hiring and bonuses. They are projecting these will ease this year and the last two quarters will be profitable. So, if they can get through Q2 tomorrow with minimal cash burn the balance sheet does look pretty good for the current market cap heading into the second half of the year where they are looking to be profitable.
The last reason is I trust current management way more than the CEO that fumbled the IPO and migrant contract. The current CEO, Lee Bienstock, and CFO Norm Rosenberg, have been mired diligent in the businesses they are pursuing to get to profitability. They are leaning into medical transport which is stable, and growing the high margin businesses like in home phlebotomy. The big thing, though, is that they have never diluted the stock and seem to actually take shareholder value seriously which is rare in the penny stock space. In my opinion, they clearly value having analyst coverage of the stock (cannacord, stifel, btig, cantor all cover the stock off the top of my head). They’ve only ever had to approve the use of a reverse split because they were under $1, but have not had to use it since they were granted an extension til January 2027 recently. They also have a buyback they can use until then.
I’m holding my shares for earnings tomorrow, and I hope that if they can meet expectations and reiterate their path profitability in the second half of the year that it will set them up to regain the $1 minimum organically. With their $300 million+ in annual revenues, cash on hand and little debt, I think there’s an opportunity at a $65 million market cap. What we need to see is that they can minimize the losses by keeping margins stable and bringing down expenses this quarter, so the cash burn stabilizes.