HealthEquity To Capture More Market Share, Says Analyst In Overweight Rating Rationale

  • KeyBanc Capital Markets analyst Scott Schoenhaus reiterated an Overweight rating on HealthEquity, Inc. HQY, with an $85 price target.
  • HealthEquity delivered a Street-beating performance in the first quarter, where earnings and revenues exceeded expectations. 
  • The company raised both its FY24 revenue and Adj. EBITDA guidance with cash yields.
  • The analyst believes that HealthEquity is well-positioned to grow revenue by gaining share within the Health Savings Accounts markets (both organically and opportunistically via acquisitions, albeit M&A likely pushed out).
  • In addition, HealthEquity's growing, high-margin HSA assets are contributing to a strong cash position, which will support multiple expansions for an Overweight rating by the analyst going ahead.
  • Based on the tailwinds, the analyst raised estimates to reflect higher yields and some service fee growth.
  • For FY24, the analyst sees a revenue estimate of $984.8 million, up from earlier expectations of $967.5 million. The adjusted EBITDA estimate for FY24 is $338.1 million, higher than the prior estimate of $324.4 million.
  • For FY25, the analyst's revenue estimate is $1.138 billion, up from the prior expectation of $1.132 billion. The adjusted EBITDA estimate is $439.3 million against the previous estimate of $426.6 million. 
  • Price Action: HQY shares are trading higher by 10.27% to $64.88 on the last check Tuesday.
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