AI Disruption And Government Cuts Will Erode Mobile Service Demand

Key Takeaways

• Shifts toward telehealth, automation, and industry consolidation threaten DocGo's human-staffed model and could limit its market relevance and future growth.
  
• Dependence on government contracts and rising labor costs expose DocGo to volatility, compliance risks, and shrinking profitability amid competitive and regulatory pressures.
  
• Rapid expansion in mobile health, tech investments, and a focus on value-based care strengthen DocGo's growth prospects and operational efficiency despite shifts in contract revenue mix.

Catalysts

Provides mobile health and medical transportation services in the United States and the United Kingdom.

• The rapid adoption of AI and automation in healthcare threatens to undercut DocGo's core advantage of a human-staffed mobile service model; as health systems and insurers increasingly shift to telehealth and automated solutions, DocGo may face declining demand and market relevance, resulting in long-term revenue stagnation or contraction.
  
• DocGo's heavy reliance on municipal and government contracts exposes the company to serious political and budgetary risk, especially as government entities confront constrained or unpredictable finance environments; any reduction in public spending could lead to abrupt contract cancellations or non-renewals, which would sharply erode revenue visibility and future cash flows.
  
• The company's continued expansion and rapid ramp-up in new geographies heighten the risk of compliance failures, regulatory penalties, or even reputational damage; as regulatory scrutiny grows-particularly around patient data and telehealth delivery-future operating costs could increase dramatically, compressing net margins and undermining earnings growth for years to come.
  
• Wage inflation and persistent labor shortages among EMTs and clinical staff are likely to place sustained pressure on DocGo's ability to maintain profitable margins; as compensation costs rise faster than reimbursement rates, gross margins and EBITDA are likely to remain structurally suppressed, impeding progress toward long-term profitability.
  
• As healthcare delivery consolidates around large integrated systems with in-house mobile or preventative care solutions, DocGo risks being crowded out by better-resourced incumbents; this intensifying competitive dynamic could drive industry-wide price compression, curtailing revenue growth and undermining the total addressable market over the next decade.

DocGo Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on DocGo compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming DocGo's revenue will decrease by 7.2% annually over the next 3 years.
• The bearish analysts are not forecasting that DocGo will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate DocGo's profit margin will increase from -4.2% to the average US Healthcare industry of 5.5% in 3 years.
• If DocGo's profit margin were to converge on the industry average, you could expect earnings to reach $19.0 million (and earnings per share of $0.22) by about August 2028, up from $-18.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 8.0x on those 2028 earnings, up from -8.5x today. This future PE is lower than the current PE for the US Healthcare industry at 20.0x.
• Analysts expect the number of shares outstanding to decline by 4.46% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

DocGo Future Earnings Per Share Growth

Risks

• DocGo is rapidly expanding its mobile health and care gap closure programs, signing new contracts with large national payers, expanding into additional states, and deepening relationships with major insurance companies, all of which can drive sustained top-line revenue growth in alignment with secular trends towards proactive, at-home care.
  
• The company is investing in technology and AI-driven platforms, demonstrated by the deployment of AI agents for patient engagement and appointment management, which is expected to enhance operational efficiency, clinician utilization, and gross margins over time-positively impacting net margins and earnings as digital transformation accelerates across the healthcare sector.
  
• Despite the wind-down of government migrant-related contracts, DocGo's core medical transportation and payer/provider businesses are showing year-over-year volume growth, with transportation gross margins improving and management targeting a return to double-digit EBITDA margins, suggesting a pathway to improved profitability and earnings.
  
• DocGo's strengthening balance sheet, marked by an increase in total cash to $128.7 million, steady positive cash flow from operations, and the elimination of its line of credit debt, positions the company to weather near-term revenue fluctuations and fund future expansion, which may provide downside protection to net income and support share price stability.
  
• The company's focus on scaling preventative and value-based care models, in partnership with leading health systems, positions it to benefit from long-term industry shifts toward value-based care, which can drive recurring revenue streams, improve patient outcomes, and present opportunities for margin expansion in the future.

Valuation

• The assumed bearish price target for DocGo is $1.45, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of DocGo's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $1.45.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $348.3 million, earnings will come to $19.0 million, and it would be trading on a PE ratio of 8.0x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $1.57, the bearish analyst price target of $1.45 is 8.3% lower.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.