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Highlights:
- Price Target Adjusted: Panmure Liberum lowers Kooth’s price target from 500p to 375p due to contract challenges in the US.
- Expansion Strategy Under Pressure: Loss of a major Pennsylvania contract and California’s media scrutiny have impacted confidence in Kooth’s American expansion.
- Positive Long-Term Outlook: Despite short-term challenges, analysts remain positive on Kooth’s model but acknowledge increased US market risk.
Panmure Liberum has reduced its price target for digital mental health provider Kooth PLC (LSE:KOO) from 500p to 375p, following recent challenges the company encountered with its US contracts. Kooth, which has been focused on expanding its mental health services to American youth, lost a significant contract in Pennsylvania after failing to secure the necessary stakeholder backing. This development has cast a shadow over Kooth’s ambitious American growth plans, according to Panmure Liberum’s analysis.
The brokerage firm explained that the termination of this contract is a significant setback, underscoring how sensitive the US market can be, especially concerning youth mental health services. Adding to the difficulty, Kooth’s contract in California is also facing scrutiny. According to Panmure Liberum, this contract has attracted adverse media attention and potential political resistance, raising further doubts about the company’s path to establishing a strong foothold in the US.
Analysts at Panmure Liberum, while acknowledging the increased risk associated with Kooth’s US operations, continue to view the company’s business model favorably. They highlight that despite these setbacks, Kooth’s platform offers valuable digital mental health support that could have lasting impact. However, they caution that political sensitivities around youth mental health in the US could hinder Kooth’s growth potential.
Maintaining a ‘buy’ recommendation, Panmure Liberum’s adjusted price target reflects a more cautious outlook, given the uncertainty surrounding Kooth’s future US opportunities. At 375p, the target remains significantly higher than Kooth’s current trading price of 158p. This cautious optimism underscores the potential seen in Kooth’s core model, though achieving US market traction will require navigating the evolving political landscape in mental health support.
