Piper Sandler cuts Health Catalyst price target to $8, keeps overweight

On Tuesday, Piper Sandler adjusted its outlook on Health Catalyst Inc. (NASDAQ:HCAT) shares, reducing the price target to $8 from the previous $12, while maintaining an Overweight rating on the stock. Currently trading at $5.75, InvestingPro analysis suggests the stock is slightly undervalued, with analyst targets ranging from $7 to $16. The revision comes after a detailed analysis of the company’s revised CY25 revenue guidance and its impact on the financial forecast.

Health Catalyst recently updated its revenue projections, which now fall short of the prior estimates. On February 22, 2024, the company had provided CY24 guidance with expected revenue of $308.0M at the midpoint. It also anticipated a year-over-year growth of 10.0% to 15.0% for CY25, targeting a midpoint revenue of $346.6M, an increase of $38.6M from the previous year. According to InvestingPro data, the company’s current revenue stands at $302.06M with a moderate growth rate of 4.15%. The latest guidance reflects a like-for-like reduction in CY25 revenue growth by $19.9M, attributed to weaker than expected CY24 revenue retention and bookings.

Despite these challenges, Health Catalyst maintains its expectation to achieve $39.0M in adjusted EBITDA for CY25. The company acknowledges that its ambulatory TEMS might negatively affect adjusted EBITDA in the first half of CY25, but anticipates relief once pilot programs conclude. Analysts at Piper Sandler estimate that the reduced revenue, combined with dollar-based revenue retention issues and launch price degradation, will create a $19.9M headwind against the previous revenue guidance for CY25.

The firm believes that even with the reduction in anticipated revenue, Health Catalyst can still reach its adjusted EBITDA target, thanks to upfront and incremental operational efficiencies. Piper Sandler’s price target of $8 is based on a steady 15x multiple of the lower CY25E adjusted EBITDA, adjusted for reduced pro forma net cash and a higher share count. The firm’s analysis underscores the company’s ability to navigate through top-line pressures and achieve its profitability goals. For deeper insights into Health Catalyst’s financial health and growth potential, investors can access comprehensive analysis and additional ProTips through the detailed Pro Research Report available on InvestingPro.

In other recent news, Health Catalyst has been the subject of multiple analyst updates. Canaccord Genuity revised its price target for the company’s shares to $10, maintaining a Buy rating. This followed several business developments, including the acquisition of Upfront Healthcare Services (NASDAQ:HCSG) and a partnership with Databricks. Despite a slight revenue miss in the preliminary fourth-quarter results, the company’s technology revenue and adjusted EBITDA met projections.

Similarly, RBC Capital Markets reduced its price target from $9.00 to $7.00, sustaining a Sector Perform rating. This followed Health Catalyst’s mixed fourth-quarter preliminary update and detailed guidance for 2025. The company’s updated growth outlook implies a revenue increase of approximately 9.5%.

In another development, Health Catalyst announced its definitive agreement to acquire Upfront Healthcare Services, a patient engagement platform provider. The transaction is expected to be finalized in the first quarter of 2025. The company aims to enhance its existing patient engagement portfolio with Upfront’s capabilities.

KeyBanc Capital Markets upgraded Health Catalyst stock from Sector Weight to Overweight and set a new price target of $9.00. The firm cited the early stages of margin expansion leading to healthier technology revenue growth as a contributing factor to the upgrade.

Lastly, Piper Sandler increased the price target on Health Catalyst’s stock to $12.00, reaffirming an Overweight rating. This adjustment came as Piper Sandler updated its model to incorporate the revised calendar year 2024 (CY24) guidance provided by Health Catalyst, which anticipates a robust year-over-year growth of approximately 50% in adjusted EBITDA for calendar year 2025 (CY25).

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