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On Tuesday, BofA Securities revised its price target for Accolade Inc. (NASDAQ:ACCD), a healthcare technology company, reducing it to $5.75 from the previous $7.00 while sustaining a Buy rating on the stock. The adjustment follows Accolade's second-quarter results, which highlighted the company's continued path toward improved profitability amid moderating revenue growth.
The analyst from BofA Securities noted Accolade's performance in the second quarter, emphasizing that the company's efforts are paying off in terms of profitability. The current selling season is expected to be favorable for Accolade, as employers are increasingly looking to manage rising healthcare costs and ensure returns on investment. The analyst projected that Accolade could maintain growth in the low-double digit range and that its operating leverage could potentially double EBITDA by fiscal year 2026.
Accolade's diversified platform, which includes a partner ecosystem and various distribution channels, is seen as a key strength that could offer resilience. This is particularly relevant as customers seek to control expenses related to GLP-1s, cancer treatments, and other complex healthcare benefits. The firm's analyst believes that these attributes position Accolade well in the marketplace.
The firm remains positive about Accolade's long-term prospects, suggesting that the current market valuation does not fully capture the company's potential. The new price objective of $5.75 is based on approximately 0.7 times the estimated revenue for calendar year 2025, a reduction from the 1.0 times revenue multiple previously applied for calendar year 2024. This change reflects a more conservative assessment of Accolade's growth trajectory.
In other recent news, Accolade, Inc. has reported strong financial results for the second quarter of 2025, surpassing revenue forecasts with a total of $106.4 million. The company's adjusted EBITDA also outperformed guidance, and a significant cash position of over $234 million was maintained. These recent developments highlight the success of Accolade's collaborations with clients like DeVry University and its utilization of AI in healthcare.
Analysts noted Accolade's strong pipeline of new business opportunities, especially in health plans and government segments. The company's interest in GLP-1 medications is driving demand for its services, with retention rates for its B2B business projected above 90%. Usage-based revenue accounts for approximately 32% of total revenue.
Accolade has projected a positive adjusted EBITDA of $15 million to $20 million and affirmed its fiscal year 2025 revenue guidance at $460 million to $475 million. However, it anticipates an increase in operating expenses in the second half of the year due to marketing efforts. Despite a sequential decline in gross margin attributed to a previous performance guarantee, Accolade remains optimistic about its growth and profitability balance.
InvestingPro Insights
Recent InvestingPro data provides additional context to BofA Securities' analysis of Accolade Inc. (NASDAQ:ACCD). The company's market capitalization stands at $320.83 million, reflecting its current market valuation. Despite the challenges highlighted in the article, Accolade has shown revenue growth of 16.37% over the last twelve months, with quarterly revenue growth of 18.49% in Q1 2025, indicating continued expansion in line with the analyst's projection of low-double digit growth.
InvestingPro Tips reveal that Accolade operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could provide some financial flexibility as the company works towards improved profitability. However, it's worth noting that the stock has taken a significant hit over the last six months, with a price total return of -57.27%, aligning with the analyst's more conservative valuation approach.
For investors considering Accolade's potential, InvestingPro offers 8 additional tips that could provide further insights into the company's financial health and market position. These tips, along with real-time metrics, can be valuable for assessing Accolade's progress towards the profitability goals discussed in the article.
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