Will DOGE sink electroCore stock? The market seems to think so

Medical technology company electroCore (ECOR) took a steep hit on Thursday, tumbling 26.54% to $9.55, despite only narrowly missing earnings estimates.

The sell-off came after ECOR stock's earnings revealed its revenue growth was largely driven by an 85% jump in sales to the U.S. Department of Defense and Veterans Affairs.

Landing government contracts used to be a major win for companies like electroCore, but relying too much on Uncle Sam now looks increasingly risky.

With federal staffing cuts of up to 200,000 workers now under discussion, the Department of Government Efficiency’s (DOGE) ongoing push to slash spending threatens electroCore’s future sales.

“Any spending cuts or government policies may negatively impact the timing or amounts of sales to these customers, which could result in lost sales and harm our business and operation results,” electroCore cautioned in its full-year financial disclosure.

The prospect of those job cuts took a hit Thursday after a federal ruling cast doubt on the proposed layoffs.

Government contracts mask weak commercial sales

electroCore’s growing dependency on government contracts is becoming more evident.

Commercial sales slumped 15% last year, leaving the company increasingly reliant on its three biggest customers: the Department of Defense, the VA, and the UK’s National Health Service.

“We have a limited history commercializing our general wellness and human performance products in the United States, for which market acceptance and commercial success are uncertain,” the company noted.

electroCore reported a larger-than-expected earnings loss of -$0.40 per share, missing estimates of -$0.34. Its net loss for 2024 came in at $11.88 million — down significantly from the year prior— while revenue jumped 57% year-over-year.

The company’s health and wellness app, Truvaga, and U.S. military orders for its non-prescription headache treatment, Rx gammaCore were the biggest revenue growth driver.

Meanwhile, sales for its TAC-STIM nerve stimulator, developed for military use, dropped by nearly a third (32%). Commercial revenue for Rx gammaCore declined, and its UK business remained flat.

Despite the post-earnings sell-off, analysts are still backing the stock.

Ladenburg Thalmann assigned a price target of $26 - $28 and rated electroCore a “Strong Buy” on Thursday. HC Wainwright & Co. also issued a “Strong Buy” rating, with a $25 target.