Health Catalyst stock target cut, buy rating at Canaccord on developments

Tuesday, Canaccord Genuity revised its stock price target for Health Catalyst Inc. (NASDAQ:HCAT) shares, reducing it to $10 from the prior $11, while sustaining a Buy rating. According to InvestingPro data, the stock is currently trading near its 52-week low of $5.35, with technical indicators suggesting oversold conditions. The company's shares have declined over 40% in the past year, though analysis suggests the stock may be undervalued at current levels.

The adjustment follows a series of business developments reported by the company last week, which included the acquisition of Upfront Healthcare Services (NASDAQ:HCSG), the addition of a new multi-year platform client, and a partnership with Databricks aimed at enhancing data sharing and analytics on the Ignite platform.

These updates, however, have led to downward volatility in the stock, attributed to the high valuation of the acquisition and a 2025 revenue growth forecast that fell short of expectations.

Health Catalyst's preliminary fourth-quarter results showed revenues slightly below estimates, with minor project delays cited as a contributing factor. Despite this, the company's technology revenue exceeded predictions and adjusted EBITDA aligned with projections. With a current market capitalization of $334 million and trailing twelve-month revenue of $302 million, the company maintains a healthy gross margin of 46.17%.

InvestingPro subscribers can access 7 additional key insights and a comprehensive Pro Research Report that provides deep-dive analysis of the company's financial health. The acquisition of Upfront, which was completed for a significant premium at approximately 6.6 times the estimated 2025 revenue, has drawn investor scrutiny, especially as the company's revenue growth targets for 2025 are now projected to be less than ten percent.

On a more positive note, Health Catalyst is aiming for approximately 40 net new platform clients in 2025, up from 21 in 2024, as it seeks to expand its higher-margin technology business. The company's long-term revenue and adjusted EBITDA targets for 2028, of roughly $500 million and $100 million respectively, remain unchanged.

Canaccord Genuity's outlook suggests that the valuation, which is below ten times the projected 2025 adjusted EBITDA, presents a favorable risk/reward scenario. Nevertheless, the firm indicates that investor confidence may hinge on the company's ability to secure new technology platform clients in the first half of 2025.

The report concluded with an affirmation of Health Catalyst's potential to achieve its target of around 40 net new platform clients, considering its existing base of over 900 application-only clients that could be transitioned to the Ignite platform.

Canaccord Genuity maintains its Buy rating on Health Catalyst stock with the updated price target of $10. Notably, InvestingPro analysis indicates that while the company isn't currently profitable, analysts expect it to achieve profitability this year, potentially marking a significant turning point for investors.

In other recent news, Health Catalyst has been subject to several significant developments. The company has announced its plans to acquire Upfront Healthcare Services, a patient engagement platform provider.

The transaction, expected to be finalized in the first quarter of 2025, is set to enhance Health Catalyst's existing patient engagement portfolio. Moreover, Health Catalyst disclosed positive third-quarter financial results for 2024, indicating a shift back towards software in its revenue mix.

Analysts have shown optimism for the company's performance, with KeyBanc Capital Markets upgrading Health Catalyst from Sector Weight to Overweight. Similarly, Piper Sandler and Stephens have increased their price targets on the company's stock. RBC Capital, on the other hand, has cut the stock target to $7, expressing cautious optimism about the company's bookings outlook for 2025.

These recent developments highlight the dynamic landscape of Health Catalyst's operations and financial health. Analysts' perspectives offer valuable insights into the company's potential growth, while the planned acquisition of Upfront Healthcare Services underscores the company's strategic moves in enhancing its service portfolio.

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