On Tuesday, RBC Capital maintained its Outperform rating on shares of HealthEquity, Inc (NASDAQ:HQY) and increased the price target to $105 from the previous $100. This adjustment follows the company's third fiscal quarter results, which exceeded consensus expectations, and a confident outlook from the management.
The stock, currently trading near its 52-week high of $105.82, has delivered an impressive 52.34% return year-to-date, according to InvestingPro data.
HealthEquity reported a third fiscal quarter revenue that was 3.6% above consensus, and EBITDA that surpassed expectations by 3.9%, even after incurring $8 million in excess service costs. The company's strong financial position is reflected in its $360.89M EBITDA and healthy current ratio of 3.2.
The management anticipates only a modest impact from these costs in the fourth fiscal quarter and has consequently raised the full-year guidance to a figure higher than the recent overperformance. Want deeper insights? InvestingPro subscribers have access to over 10 additional exclusive tips and comprehensive financial metrics for HealthEquity.
In addition to the updated guidance for the current fiscal year, HealthEquity also presented its initial revenue and EBITDA projections for fiscal year 2026. The midpoints of these forecasts were approximately 2.5% and 2.2% below consensus, respectively.
RBC Capital attributes this conservative outlook to a mix of factors, including the timing of cash placements and a cautious approach generally adopted by the company amidst changes such as the introduction of a new CEO.
The firm's revised $105 price target is based on 23 times their fiscal year 2027 earnings per share estimate, which mostly aligns with calendar year 2026. This represents an adjustment from the previous target, which was set at 24 times the fiscal year 2026 estimate. The change reflects RBC Capital's updated assessment following the company's latest financial update disclosed on Monday.
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