Investing.com -- Doximity was downgraded to Underperform from Buy by BofA Securities, which slashed its price objective to $20 from $38, citing limited visibility into the company's AI-driven growth strategy, rising execution risks and concerns that elevated investment spending will weigh on margins for years.

Shares in the company fell 5% in premarket trading on Monday.

The brokerage said Doximity remains the leader in physician-focused pharmaceutical advertising and is making the right strategic investments through offerings such as its DoxGPT AI assistant. However, it believes competition from AI-focused rivals, including OpenAI and OpenEvidence, could make it harder for the company to expand spending from existing pharmaceutical customers while increasing pressure on profitability.

BofA expects pharmaceutical companies to diversify AI spending across competing platforms, limiting Doximity's ability to gain additional market share. As a result, it trimmed its fiscal 2027 and 2028 revenue forecasts and warned that future earnings estimates remain at risk.

The bank also expects Doximity's AI investment cycle to last several years as rivals continue investing aggressively. It said reliance on third-party frontier AI models could leave the company at a disadvantage on computing costs, while pricing pressure may further erode its industry-leading margins. BofA lowered its fiscal 2028 and 2029 EBITDA margin forecasts to 46.5% and 46.0%, respectively, from more than 51% previously.

BofA now values the company at roughly 9x projected 2026 EV/EBITDA, a discount to leading healthcare IT peers, arguing that the stock deserves a lower multiple given the heightened risk of sustained margin compression despite its strong competitive position.