Accolade's Pipeline Strength Amid Solid Demand To Propel Growth, Bullish Analyst Says

Needham analyst Ryan MacDonald reiterated a Buy rating on the shares of Accolade, Inc. ACCD, raising the price target to $17 from $15.

ACCD is entering 2Q24 with a sense of optimism, notes the analyst, adding that the company's pipeline remains strong with a healthy level of demand for multiproduct adoption. 

Expert Medical Opinion (EMO) is the most significant area of upside surprise as ACCD noted the segment is growing at a 30% rate vs. prior expectations in the recently-reported  Q1 FY24 results.

First-quarter sales of $93.2 million were up 9% Y/Y, beating the consensus of $90.30 million. 

Also Read: Accolade's Financial Forecast: Anticipating Raised Guidance and Robust Revenue Growth

This is driven by healthy net new customer adoption and utilization, notes the analyst. 

Virtual Primary Care (VPC) also remains strong, bolstered not only by increased DTC demand from GLP-1 drugs, but also enterprise usage that came in ahead of targets, MacDonald adds. 

The analyst expects the robust demand environment to translate to healthy bookings throughout FY24 and remains confident in ACCD's ability to hit its FY25 targets.

The analyst notes the company's pipeline remains strong, with most deals multiproduct, a continued theme from last year that management believes is long-term durable.

On the negative side, the analyst cautioned that competition continues to grow in Accolade's end market, with vendors becoming increasingly competitive on price. 

This creates churn risk, pricing pressure upon renewals, and margin compression.

Price Action: ACCD shares are trading higher by 9.18% to $13.80 on the last check Friday.