On Wednesday, HealthEquity, Inc. (NASDAQ: HQY) received an optimistic update from BTIG, with the firm raising the price target to $110 from the previous $100, while retaining a Buy rating on the stock. This adjustment follows the company's announcement of robust fourth-quarter results that surpassed both BTIG and consensus estimates.
HealthEquity reported total revenue of $262.4 million for the fourth quarter, marking a year-over-year increase of 12%, which exceeded the BTIG and consensus estimates of $260.7 million and $258.7 million, respectively. Additionally, the company's adjusted EBITDA for the quarter was $98.8 million, a significant 34% increase from the previous year, surpassing estimates of $98 million by BTIG and $91.5 million by consensus.
The company has reaffirmed its revenue guidance for the fiscal year 2025, projecting between $1.14 billion and $1.16 billion, and provided adjusted EBITDA guidance in the range of $438 million to $458 million. The analyst noted the quarter's performance as excellent, highlighting the growth in high-margin Custodial revenue, which has driven better yields and interest rates.
HealthEquity also saw a rise in Interchange revenue by 6% year-over-year. Although there was a slight 1% decline in Service revenue year-over-year, the analyst views this as an effective trade-off considering the yield and service fees. The company's Health Savings Account (HSA) membership increased by 9% year-over-year, with assets growing by 14%, indicating that HealthEquity continues to gain market share.
The firm also emphasized HealthEquity's comprehensive suite of solutions within Consumer Directed Benefits (CDB) and Flexible Spending Accounts (FSAs), which provides an advantage over institutions focused solely on HSAs. The company plans to enhance member engagement by providing an app that allows members to compare healthcare providers based on cost and quality within their zip code, which is expected to aid members in making more budget-conscious and value-driven healthcare decisions.
In summary, the analyst from BTIG expressed a positive view on HealthEquity's performance and its potential impact on tech-enabled healthcare services investors, noting that the company is delivering on improved trend results for plans and positively influencing healthcare decision-making by involving members more directly in the financial aspects of their healthcare choices.
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