Truist Securities analysts reiterated a Buy rating and $35.00 price target on Phreesia Inc . (NYSE:PHR).
The analysts comment "Change Healthcare (NASDAQ:CHNG) Impact Remains in Focus: Post R1 RCM (NASDAQ:RCM, Hold) "earnings miss and guidance cut" (primarily driven by Change Healthcare disruption) a few weeks back, there has been increased focus on the Change disruption impact on Phreesia. To that point, we would note that the business model of RCM and PHR are very different. For example, the majority of shortfall in RCM's results and guidance was driven by a modular customer (Sutter Health [private]) bankruptcy and the shortfall in the company's incentives fees as the incident negatively impacted balance sheet metrics related to cash and A/R that gets measured at the end of each quarter. On the flip side, half of PHR's revenues are related to high visibility Subscription business, while the remaining half is tied to utilization based businesses: Payment processing fees and Network solutions. However, as widely reported, the overall utilization impact from Change Healthcare has been pretty minimum. Recall, PHR noted on its last earnings call that Change Healthcare has been one of PHR's clearing houses that provides eligibility and benefit check capabilities and PHR moved the vast majority of volumes to back-up and alternative clearing houses. As such, we would expect potentially minimal disruption on PHR's Payment processing fees and Network Solutions businesses as it relates to volumes. Management also noted that the disruption did not have any material change to the selling environment. However, it remains to be seen if the disruption created distraction for providers leading to a potential delay in implementing PHR solutions and therefore a potential push on implementation to later in the year. To that point, we would note our expectations of 105 provider adds in FY1Q25 already reflect a moderation from the quarterly average organic net adds of 158 in FY24."