Barclays has sustained its Equalweight rating and a $5.50 price target for Accolade Inc. (NASDAQ: ACCD), following a mixed financial report.
Accolade's second-quarter results surpassed expectations with a slight revenue and EBITDA beat, but this was counterbalanced by a third-quarter guidance that fell short of projections.
Accolade reported second-quarter revenues of $106 million, a 10% increase year over year, which was a modest beat against Barclays and consensus estimates of $105 million. The adjusted EBITDA loss of $3 million was significantly better than the anticipated loss of $9 million from both Barclays and consensus figures.
The improved adjusted EBITDA margin of (2.7%) reflected a year-over-year margin expansion due to greater operational expense leverage.
However, the company's outlook for the third quarter did not meet expectations, with revenue guidance of $104 million to $107 million missing the $109 million to $110 million anticipated by Barclays and consensus.
The projected adjusted EBITDA loss of $3 million to $5 million also fell short of the modest gains predicted by Barclays and consensus. This suggests a margin of (4)% at the midpoint but indicates some improvement from cost-saving initiatives.
Looking ahead, Accolade's implied fourth-quarter revenue guidance suggests a significant quarter-over-quarter increase, with a range of $139 million to $151 million. This forecast positions Barclays' expectation of $141 million at the lower end of Accolade's guidance. The implied adjusted EBITDA guidance for the fourth quarter, ranging from $26 million to $29 million, hovers near the higher end of Barclays and consensus expectations, implying a 19% margin and a substantial step up from the previous fiscal year's pace.
In other recent news, Accolade Inc. has been the subject of considerable attention from analysts at Truist Securities and Needham. Both firms have maintained a Buy rating for Accolade, with Truist Securities setting a price target of $9.00 and Needham at $8.00.
These ratings come as Accolade prepares to release its second-quarter earnings for fiscal year 2025, with both firms expressing confidence in the company's potential to meet or exceed financial expectations.
A notable aspect of Accolade's strategy is the company's decision to scale back marketing expenses related to usage-based revenues. This move, which includes services like PlushCare and 2nd.MD, has led to a conservative revenue forecast for the fiscal year. Despite this, both Truist Securities and Needham see potential gains from performance guarantees and utilization trends in these services.
The firms also highlight Accolade's operational efficiencies and cost-cutting initiatives as key factors in the company's potential success. Needham, in particular, views Accolade as well-positioned to benefit from the broader trend of increased healthcare utilization.
InvestingPro Insights
Accolade Inc.'s financial landscape presents a mixed picture, as reflected in the recent InvestingPro data and tips. The company's market capitalization stands at $317.63 million, with a price-to-book ratio of 0.73, suggesting the stock might be undervalued relative to its book value. This aligns with the article's discussion of Accolade's financial performance and market expectations.
InvestingPro Tips highlight 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 navigates its growth trajectory. However, the stock's volatility and significant decline over the past six months, as noted by InvestingPro, correlate with the market's reaction to the company's mixed financial results and guidance discussed in the article.
It's worth noting that while Accolade has shown revenue growth of 16.37% over the last twelve months, reaching $431.53 million, the company is not currently profitable. This context adds depth to the article's analysis of Accolade's financial performance and future outlook.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Accolade, providing a broader perspective on the company's financial health and market position.
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