On Friday, DA Davidson revised its price target for Accolade Inc. (NASDAQ:ACCD) shares to $5.00, down from the previous target of $10.00, while maintaining a Neutral rating on the stock. The adjustment followed Accolade's first-quarter fiscal year 2025 (F1Q25) guidance, which projected lower top-line growth than previously expected.
The company's updated forecast, which reduced expected revenue by 5% for the fiscal year 2025, was attributed to a strategic decision by management to apply more stringent criteria to marketing investments. Despite the lower revenue guidance, the company reiterated its EBITDA outlook for FY25.
In the aftermath of the announcement, Accolade's shares experienced a significant drop, with indications of a 25%-30% decline in after-hours trading. The reassessment of the stock's value by DA Davidson reflects a recalibration of the risk premium due to decreased confidence in the company's growth prospects and its ability to scale effectively.
The new price target of $5 is based on a valuation of the company at 1x next twelve months (NTM) sales. This valuation adjustment is a direct response to the reduced growth visibility and the subsequent impact on investor sentiment regarding the company's future financial performance.
In other recent news, Accolade, the healthcare firm, reported an 18% year-over-year revenue growth in its first quarter of 2025, totaling $110.5 million. The company has revised its full-year revenue outlook for 2025 to between $460 million and $475 million, indicating an 11% to 15% growth year-over-year. Despite a challenging operating environment in the healthcare industry, Accolade's adjusted EBITDA forecast remains positive, ranging from $15 million to $20 million.
The company's focus on leveraging artificial intelligence and virtual services for healthcare delivery, along with a strong customer base of over 1,200 and 14 million members, demonstrates its commitment to growth and financial stability. However, the company's long-term revenue goal of $1 billion has been postponed by approximately one year.
Accolade plans to discuss its long-term strategies at an upcoming Analyst Day. The company aims for sustainable growth while prioritizing profitability and bottom-line performance.
InvestingPro Insights
In light of DA Davidson's revised price target for Accolade Inc. (NASDAQ:ACCD), investors might also consider the latest InvestingPro Data and Tips for a comprehensive overview. Accolade's market capitalization currently stands at $511.25 million, and despite a challenging quarter, the company reported a revenue growth of 14.09% over the last twelve months as of Q4 2024. However, the company's P/E ratio is negative at -4.77, reflecting its lack of profitability during this period.
InvestingPro Tips highlight that Accolade's stock price movements have been quite volatile, with the price having fallen significantly over the last three months. The company's liquid assets exceed short-term obligations, which may provide some financial flexibility in the near term. Yet, it's worth noting that analysts do not anticipate the company will be profitable this year, and Accolade does not pay a dividend to shareholders, which could be a concern for income-focused investors.
For those interested in a deeper dive into Accolade's financial health and stock performance, InvestingPro offers additional tips beyond these insights. With the promo code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to a total of 10 InvestingPro Tips for Accolade Inc. This can provide a more nuanced understanding of the risks and opportunities associated with the stock.
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