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On Wednesday, Canaccord Genuity adjusted its price target on shares of Accolade Inc. (NASDAQ:ACCD), reducing it to $7.00 from the previous $13.00, while maintaining a Buy rating on the stock.
The adjustment follows Accolade's second-quarter performance, which surpassed both Canaccord's and Wall Street's expectations for revenue and adjusted EBITDA, along with positive free cash flow.
Despite the company's third-quarter guidance falling below estimates, the reaffirmation of its fiscal year 2025 guidance has provided confidence in Accolade's ability to meet performance guarantees (PGs) and secure new business to close the gap in the fourth quarter.
Accolade's management has expressed optimism about a strong pipeline with diversification across employers, health plans, and government segments. This diverse pipeline supports confidence in the company's short- and long-term financial goals.
A notable development is Accolade's competitive edge in the expert medical opinion (EMO) product market, which has been attributed to its ability to generate a return on investment (ROI).
However, the management also noted that many deals are still in negotiation, which are not tied to a January 1 start date, suggesting that revenue growth in fiscal year 2026 might experience a slower pace due to staggered launches.
In the employer segment, management has observed a greater emphasis on ROI and at-risk revenue, areas where Accolade has demonstrated strength against competitors by delivering tangible results.
For example, DeVry, a long-standing customer, has expanded their partnership with Accolade and successfully kept their medical cost trends around 2% annually, compared to the national average increase of 6-10%.
Accolade has also been effective in managing marketing expenses for usage-based and direct-to-consumer offerings, including the PlushCare business, which has contributed to the company's profitability, as evidenced by the adjusted EBITDA outperformance in the quarter.
Despite a wider fiscal year guidance range attributed to marketing spend discretion, the company's focus on prudent growth and bottom line results remains encouraging. Canaccord believes that at approximately 9.8 times the firm's updated fiscal year 2026 adjusted EBITDA estimate, Accolade's stock offers value at its current levels.
The firm concludes by reiterating its Buy rating and adjusting the price target to reflect the revised revenue growth estimate and continued cost discipline that bolsters confidence in expanding profitability.
In other recent news, Accolade Inc. has reported strong financial results for the second quarter of 2025, with a total revenue of $106.4 million, surpassing revenue forecasts. The company also exceeded its adjusted EBITDA guidance and maintained a significant cash position of over $234 million.
Following these results, both Truist Securities and BofA Securities revised their price targets for Accolade. Truist Securities reduced its target to $7.50 from $9.00, and BofA Securities reduced its target to $5.75 from $7.00, both firms maintaining a Buy rating on the company's stock.
These adjustments occurred in the wake of Accolade's recent earnings call, where the company affirmed its fiscal year 2025 revenue guidance at $460 million to $475 million and projected a positive adjusted EBITDA of $15 million to $20 million.
Analysts from both firms highlighted Accolade's strong pipeline of new business opportunities, particularly in health plans and government segments. These developments reflect recent trends in Accolade's financial performance and strategic direction.
InvestingPro Insights
To complement Canaccord Genuity's analysis of Accolade Inc. (NASDAQ:ACCD), recent data from InvestingPro provides additional context for investors. Despite the company's recent stock price volatility, with a significant 57.92% decline over the past six months, Accolade has shown a strong 18.82% return in the last three months. This recent upturn aligns with the positive outlook expressed in Canaccord's report.
InvestingPro Tips highlight that Accolade operates with a moderate level of debt and maintains liquid assets that exceed short-term obligations. These factors support the company's financial flexibility as it pursues growth strategies and manages its cost structure, which are key points emphasized in the analyst's report.
It's worth noting that while Accolade is not currently profitable, its revenue growth remains solid at 16.04% over the last twelve months. This growth trajectory is crucial as the company works towards meeting its financial goals and performance guarantees mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Accolade, providing a deeper dive into the company's financial health and market position.
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