Closing out the first full week of December, shares at Cano Health (NYSE: CANO) sank—as much as 35.6% during the week—to close below $1.50. That is very near the stock's 52-week low of $1.30, and it brings the stock down by more than 84% this year. The stock opened the week at $2.01.

The dismal news comes after the company was already lamenting a discouraging Q3 report. In the earnings note, Cano reported a loss of $112 million, which contributed to an early decline. This resulted in liquidity of only $24 million (cash and equivalents), and that led to widespread concerns over the company's ability to bounce back. After all, confidence had already been slipping on the failed buyout possibilities from both CVS Health and Humana.

But what really dragged the stock that week is Third Point's sell-off of their remaining 3.5% stake in CANO. Operated by Dan Loeb, the investment advisor firm expressed enduring concern over the company's liquidity, particularly following the failed buyout. And since the company only managed to go public through a special purpose acquisitions company (SPAC) last June, a lack of cash puts them in a precarious position.

Solutions Include Quick Cash and Bumping Up Memberships

Obviously, the primary focus for CANO would be to get their hands on some quick cash. Typically, that strategy would involve picking up a few investors to flush the market with the cash they need. Unfortunately, potential suitors are few and far between right now; and rightfully so.

The company has already tried to address this by increasing membership numbers. After all, Cano Health operates 141 senior-oriented primary care centers across the country. By increasing their memberships they have managed to increase Q3 revenue by 33% (from 2021), to $665 million.

Furthermore, Cano Health could also capitalize on the needs of its primary client base and strategize a means for upping its profit by reducing its medical cost ratio among its Medicare Advantage and Medicaid memberships.

Early Downgrades Might Cloud CANO's Long-Term Potential

Downgrades have been consistent over the past two months, and the stock's downward trend certainly reflects it. But even with a downgraded outlook, it appears that investors are still not entirely turned off at Cano's long-term potential. Indeed, while many exterior factors may be tempering their potential long-term outlook, their current Price-to-book ratio is still an impressive 0.83.

On top of that, the company is trading at a volume above 50% of its daily average. While this certainly includes those who may be retreating, there is a chance that some are also hopping on board. After all, the stock's next price target is $6.00, which is significantly higher than the $1.43 (as of midday, December 9, 2022); and they have until late February/early March 2023 to do it.

Recent Earnings Beat(s) Could Indicate the Start of a Turnaround

Indeed, a quick look at earnings history suggests that the improvement is not a fluke. While earnings may have missed the target(s) through most of the last year, this metric is improving. Q2 2022, for example, was the first time the stock beat the EPS estimate (-$0.04); and in this case, even a single penny is something to celebrate. By Q3 of 2022, though, the margin increased, as Cano Health reported an EPS of -$0.01, beating the estimate by three cents.

With that in mind, it may be a bit premature to count them out right now. After all, despite the reduced confidence, the next earnings goal represents an impressive potential upside of 319.6%. And although earnings are currently in the negative, analysts also anticipate earnings losses to be smaller, with potential growth pointing at earnings losses shrinking from -$0.25 to -$0.16. That's an improvement of more than 35%.

And while we are on the subject of “improvement” it is extremely valuable to note that Cano Health has seen consistent improvement in both its financial status and operational health every year. For one, as mentioned above, revenue continues to grow, as does EPS. In addition, adjusted EBITDA for Q3 2022 came in at $42.5 million. That is a bump of 211% over the $13.6 million they reported in the same quarter from last year.

All of this is to say that Cano Health has experienced some hardship, but they are also a young stock. So while it may not be the right investment for everyone, it could be one to watch in the near future. This justifies the average analyst rating of HOLD, indicating that even as liquidity issues loom, the company's track record of revenue growth and a new focus on membership gains could be promising for those who are patient.

Analysts Set New Price Targets

Several research firms have recently commented on CANO. Citigroup decreased their price target on shares of Cano Health from $7.00 to $5.00 and set a "buy" rating on the stock in a research note on Wednesday, November 16th. Credit Suisse Group cut their price target on Cano Health to $4.00 in a research note on Monday, November 28th.

Cowen downgraded shares of Cano Health from an "outperform" rating to a "market perform" rating and cut their target price for the company from $10.00 to $3.00 in a research report on Thursday, November 10th. Bank of America dropped coverage on shares of Cano Health in a research report on Friday, September 23rd. Finally, Truist Financial started coverage on shares of Cano Health in a research report on Wednesday, September 7th.

They set a "hold" rating and a $7.00 target price for the company. One research analyst has rated the stock with a sell rating, six have assigned a hold rating and one has assigned a buy rating to the company's stock. According to MarketBeat, the company has a consensus rating of "Hold" and an average price target of $6.00.

Cano Health Price Performance

The company has a debt-to-equity ratio of 1.17, a quick ratio of 1.64 and a current ratio of 1.64. The stock's 50 day simple moving average is $3.96 and its 200 day simple moving average is $5.22.

About Cano Health 

Cano Health, Inc provides primary care medical services to its members in the United States and Puerto Rico. It owns and operates medical centers enabled by CanoPanorama, a proprietary population health management technology-powered platform that provides the healthcare providers at its medical centers with a 360-degree view of their members with actionable insights to improve care decisions and member engagement.