Eargo Inc (NASDAQ: EAR) stock plunged 61.6% after revealing that it was being investigated by the U.S. Department of Justice regarding insurance claims filed on behalf of its customers.
The hearing aids company was quickly downgraded by analysts from multiple investment banks, including Wells Fargo, JPMorgan and William Blair.
The criminal investigation targets insurance reimbursement claims submitted on behalf of Eargo’s customers covered by Federal employee health plans.
William Blair downgraded the stock to ‘market perform’ from ‘outperform’ without issuing a price target. The investment bank pointed out that there were multiple unknowns from the DoJ’s criminal justice investigation.
Wells Fargo downgraded Eargo Inc. to ‘Equal Weight’ from ‘Overweight and slashed their price target to $10 from the previous $52 price target.
JPMorgan downgraded the hearing aid company to underweight from ‘Overweight’ and cut its price target to $11.
In cases like this, there is usually more negative news in store for investors, which is why the leading investment banks were quick to downgrade the stock.
There’s also a high chance the DoJ could charge the company and its executives once the investigation is completed.
Investors would be best served to stay away from the company until there’s a clear way forward.
*This is not investment advice.
Eargo stock price.
Eargo stock plunged 61.61% to trade at $8.32, falling from Wednesday’s closing price of $21.67.
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