ATI Physical Therapy (ATIP) is the largest provider of outpatient physical therapy in the United States. The company was formed on June 16, when it joined Fortress Value Acquisition Corp. II (FVAC II), a special purpose acquisition company.
Following the merger, ATI disclosed its financial results on July 26. However, to its misfortune, ATI was not able to impress the investors with its bleak Q2 print. Since the earnings announcement, shares of the company were down 18% yesterday to close at $3.85. (See ATI Physical Therapy Dividend Date and History on TipRanks)
There were a slew of analysts who remained unimpressed with ATI’s quarterly results. To name one, Stephanie Wissink of Jefferies sees ATI in a fundamentally weak position after the company reported its Q2 earnings and lowered its outlook for 2021.
Wissink downgraded ATI, taking it from Buy to Hold, stating, “We were shocked at the size of the miss and guidance revision.” She also lowered the price target to $5.00 from $12.00. This implies an upside potential of approximately 29.9% for the next 12 months.
The four-star analyst explained that the major source of concern remains the rising attrition rates. She described ATI’s loss of physical therapists as a “shock,” especially given the extent of the impact this attrition had on ATI’s business.
Labor retention, she argued, should be a top priority for any organization because it aids in “creating a desired employment culture and brand ethos.” She also pointed out that labor attrition is specific to this company, and not an industry-related issue here. Wissink still believes “strongly in industry growth.”
In fact, she continued, the problem is entirely “company-specific,” resulting from “competition,” variable hourly schedules, and cost-cutting, including the reduction of staff benefits, and so remains a matter of acute concern.
To account for the rising attrition rates, the analyst reduced her revenue and EBITDA expectations for ATIP, and stated, “Our revenue arc is reshaped entirely, with FY23 now 40% below SPAC model.” Further, Wissink predicts “elevated labor rates to persist in the medium term, impacting EBITDA%.”
Despite the fact that the company has taken “aggressive” steps to cut attrition, the analyst is not highly convinced by management’s remedial measures, and so prefers to stay on the sidelines for now. To conclude, Wissink stated, “It’s too early to assess whether the effects will prove fruitful or if there is lasting employment brand damage.”
On TipRanks, ATI has an analyst rating consensus of Hold, based on 4 unanimous Hold ratings. The average ATI price target is $5.00, reflecting a potential 12-month upside of 29.9%.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
