Why Shares of Ontrak Are Plunging Today

What happened

Shares of Ontrak (NASDAQ:OTRK), a company using artificial intelligence to deliver outpatient care to those with chronic conditions, were down more than 40% as of 1:30 p.m. EDT after it disclosed the loss of a key customer.

A person sitting at a desk with their head on a laptop computer.

Image source: Getty Images.

So what

Today’s news adds insult to injury from this spring. The company previously let go of 35% of its workforce in March after it lost its largest contract. That one was with Aetna, a health insurance subsidiary of CVS

Although today’s lost customer is quitting at the end of this year, the company says it has already billed about $42 million of the $90 million it expected over the three-year deal. Still, it’s a huge chunk of business to replace. The company has only reported $108 million in sales over the past 12 months. The stock certainly reflects the negativity. With today’s news, it sits almost 80% below where it started the year and has a market cap of only $236 million.

OTRK Chart

OTRK data by YCharts

Now what

Despite losing the contract, management estimates the remaining customers from 2021 will contribute $50 million in revenue next year — a 62% increase. As for this year, the loss won’t effect Ontrak’s previous projections of between $80 million and $85 million in revenue.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/08/19/why-shares-of-ontrak-are-plunging-today/

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