DA Davidson Slashes Accolade Price Target to $5 on Disappointing Outlook
DA Davidson analysts lowered the price target for Accolade (NASDAQ:ACCD) to $5 from $10 while maintaining a Neutral rating following the company’s reported Q1, which resulted in a nearly 30% stock price drop pre-market today.
The downgrade decision comes in response to Accolade's guidance cut, which has raised concerns about the company's growth visibility and predictability. The 5% reduction in the full-year 2025 guidance reflects management's increased scrutiny of marketing investments. Despite this, the company reiterated its EBITDA outlook for the fiscal year.
The analysts noted that the increased risk premium is justified given the diminished visibility of growth and confidence in scaling. Consequently, the price target has been adjusted to $5, valuing the company at 1x next twelve months (NTM) sales.
| Symbol | Price | %chg |
|---|---|---|
| 2413.T | 1431 | -1.68 |
| IKS.NS | 1917.95 | -0.44 |
| IKS.BO | 1915.2 | -1.49 |
| 4483.T | 3776 | 0.37 |
Accolade, Inc. (NASDAQ:ACCD) Acquisition and Financial Performance Overview
- Transcarent's acquisition of Accolade, Inc. (NASDAQ:ACCD) aims to create a leading health and benefits platform.
- Accolade reported an EPS of -$0.31, slightly better than the estimated -$0.32, but still indicates losses.
- The company's financial health shows a mix of strengths and concerns, with a strong current ratio of 2.72 but a negative earnings yield of -14.58%.
Accolade, Inc. (NASDAQ:ACCD) is a company that provides personalized health and benefits solutions. It focuses on health advocacy, expert medical opinions, and primary care services. Recently, Transcarent announced its acquisition of Accolade, a strategic move valued at approximately $621 million. This acquisition aims to create a leading platform serving over 1,400 employer and payer clients, as highlighted by the unanimous approval from both companies' Boards of Directors.
On January 9, 2025, Accolade reported its earnings, showing an earnings per share (EPS) of -$0.31, slightly better than the estimated EPS of -$0.32. Despite this improvement, the company is still experiencing losses, as indicated by its negative price-to-earnings (P/E) ratio of approximately -6.86. This ratio suggests that the company is not currently profitable, which is a concern for investors.
Accolade's revenue for the period was approximately $105.87 million, just below the estimated $105.99 million. The company's price-to-sales ratio stands at about 1.25, meaning investors are paying $1.25 for every dollar of sales. This ratio provides insight into how the market values the company's sales, which is crucial for understanding its financial health.
The enterprise value to sales ratio is approximately 1.40, offering a perspective on the company's valuation relative to its revenue. However, the enterprise value to operating cash flow ratio is notably high at 75.55, indicating potential overvaluation based on cash flow. This high ratio suggests that the company may not be generating enough cash flow to justify its current valuation.
Accolade's financial stability is reflected in its debt-to-equity ratio of 0.51, indicating a moderate level of debt compared to equity. Additionally, the current ratio of 2.72 shows that the company has a strong ability to cover its short-term liabilities with its short-term assets. Despite these positive indicators, the negative earnings yield of -14.58% highlights the company's ongoing unprofitability.
Accolade Stock Surges 8% After Q1 Beat
Accolade (NASDAQ:ACCD) shares jumped more than 8% intra-day today after the company reported its Q1 earnings results, with EPS of ($0.52) coming in above the Street estimate of ($0.62). Revenue was $93.2 million, beating the Street estimate of $90.27 million.
The company sees Q2/24 revenue to be in the range of $93-$95 million, compared to the Street estimate of $93 million. For the full year, the company expects revenue in the range of $410-$414 million, compared to the Street estimate of $410 million.
In response to the company’s strong performance in the latest quarter, BofA Securities emphasized the continued emphasis on multi-year growth. The analysts pointed out that the updated guidance midpoint surpasses both their estimates and the consensus. Although gross margin in the quarter fell below expectations, the analysts anticipate improvements in margins as the year progresses.
