Shares of Providence Service Corp., which provides and manages government-sponsored social services, fell Monday after a RBC Capital Markets analyst downgraded the stock, citing valuation.
Shares of Providence, which is based in Tucson, Ariz., fell 57 cents, or 3.6 percent, to $15.23 in morning trading. The stock has traded from $1.33 to $16.87 over the last 52 weeks.
RBC analyst Kevin Ellich downgraded the stock to "Sector Perform" from "Outperform" after it exceeded his price target of $15. He said there are limited upcoming catalysts, and the environment for government reimbursements remains challenging, with several states still in "rough" financial shape. Providence's services include home-based counseling, substance abuse treatment, school-based counseling and tutoring, work force development, and foster care.
"While it is unclear at this point which states will enact cuts or reduce services, we believe the uncertainties warrant some caution, which is why we are moving to the sidelines," Ellich said, in a note to investors.
The potential impact from government health care reform is still unknown, he said, and could either create new opportunities or new challenges. Even with expanded Medicaid coverage, states could find it difficult to balance the influx of new beneficiaries, he said.