Health Catalyst stock downgraded by BTIG on healthcare coverage concerns

BTIG downgraded Health Catalyst Inc. (NASDAQ:HCAT) from Buy to Neutral on Monday, citing concerns about potential reductions in healthcare coverage and market saturation. The research firm pointed to the Budget Reconciliation Bill, which if passed could reduce insured lives in the U.S. by approximately 15 million people by 2034. The downgrade comes as HCAT shares have declined nearly 50% over the past six months, with InvestingPro data showing the stock trading significantly below its Fair Value, despite maintaining a "GOOD" overall financial health score.

The downgrade reflects worries about a projected 7.6 million decrease in Medicaid enrollment, representing roughly a 10% reduction in total Medicaid participation. BTIG also noted potential declines in Affordable Care Act exchange-based plans and continued pressure on Medicare Advantage plans extending into 2026. According to InvestingPro data, nine analysts have recently revised their earnings expectations downward, though the company is still expected to achieve profitability this year.

Health Catalyst’s revenue growth has decelerated significantly, slowing from approximately 37% year-over-year in 2018 and 2019 to just 4% in 2024. The first quarter of 2025 showed only 6% year-over-year growth, raising concerns that consensus expectations might be too optimistic, including the company’s guidance of approximately $500 million in revenue by 2028. Current revenue stands at $311.27 million for the last twelve months, with a gross profit margin of 46%.

BTIG expressed disappointment that Health Catalyst has not expanded more aggressively into life sciences or health plan markets. The firm estimates that Health Catalyst will likely have approximately 170 Ignite or DOS clients by year-end 2025, suggesting the company has already approached much of its total addressable market among the roughly 250 large health systems in the country.

Hospital budget constraints resulting from insurance coverage reductions and potential new waves of Medicaid re-determinations could create ongoing challenges for Health Catalyst, according to BTIG. The firm also cited concerns about tariff risks and an increasingly competitive market environment.

In other recent news, Health Catalyst Inc. reported its first-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of $0.01, compared to the forecasted $0.0027. The company also reported revenue of $79.41 million, slightly above the $79.21 million forecast. Canaccord Genuity maintained a Buy rating on Health Catalyst but adjusted its price target from $10 to $9, emphasizing the company’s acquisition of 40 new platform clients and a net dollar retention rate of 103%. Evercore ISI raised its price target for Health Catalyst to $5.00 from $4.00, citing the company’s revenue growth of 6.3% in the first quarter.

Stifel analysts maintained a Hold rating with a price target of $5.50, expressing concerns about the company’s ambitious financial targets and the risks associated with Medicaid and government funding. Health Catalyst’s strategic shift to the Ignite platform has been a focal point, with the company securing 10 new clients and expanding partnerships with Microsoft (NASDAQ:MSFT) and Databricks. The company also paid off $230 million in convertible notes, strengthening its balance sheet. Despite challenges, analysts from Canaccord Genuity and Evercore ISI remain optimistic about Health Catalyst’s growth trajectory and strategic direction.

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