Needham Remains Bullish On Phreesia & Udemy; Adds Both To Conviction List

Needham analyst Ryan MacDonald maintained Phreesia Inc PHR with a Buy and raised the price target from $35 to $40.
The analyst selected Phreesia as the top Digital Health pick for 2023, adding the stock to the Needham Conviction List.
The selection of PHR reflected MacDonald's thesis that scaled GTM functions and innovations will contribute to revenue acceleration in both Subscription + Payments and rapidly developing Network Solutions.
MacDonald saw the potential for $27.5 million in revenue upside to the FY24 consensus from scaling the existing client base and penetrating the Medicare age-in opportunity while additional upside drivers remain in-play.
With investments complete, revenue upside and expense management create a setup for margin outperformance relative to PHR's FY25 targets.
As a result, the analyst believes PHR will outperform on the top and bottom lines and view PHR's current multiple as an attractive entry point.
MacDonald reiterated Buy on Udemy, Inc UDMY with a $17 price target.
The analyst selected Udemy as the top Ed Tech pick for 2023, adding the stock to the Needham Conviction List.
The selection factored in the analyst's thesis that, despite macro-related headwinds, the company's growth engine, Udemy Business, can continue to grow well north of 40% in FY23. The new logo growth internationally and wallet share gains within the existing customer base in a tighter budget environment likely to drive consolidation aided the growth.
Outside of UB, MacDonald believes promising web traffic trends, easing comps, and the potential for rising unemployment will stabilize the consumer segment.
On the bottom line, UDMY's increased focus on hitting breakeven creates the potential for upward revisions to FY23 adjusted EBITDA. When combining this with a valuation of 1.1x the analyst's FY23 revenue estimate, MacDonald believes UDMY will likely outperform.
Price Action: PHR shares traded higher by 3.57% at $31.93, and UDMY shares traded higher by 3.94% at $11.08 on the last check Wednesday.

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