On Friday, Goldman Sachs initiated coverage on HealthEquity, Inc (NASDAQ: HQY) stock, assigning a Neutral rating and setting a price target of $108.00.
The firm's analysis suggests a balanced perspective on the company's potential for earnings growth and its ability to meet long-term EPS targets. The assessment is grounded on what is considered a balanced risk/reward scenario, factoring in current valuations.
The firm's outlook for HealthEquity is based on projected sales and EPS compound annual growth rates (CAGR) of 13.5% and 28.4%, respectively, over the fiscal years 2024 to 2027.
These projections place Goldman Sachs' estimates ahead of the consensus, reflecting updates to the firm's model as of November 11th to account for recent changes in interest rates.
This update contrasts with the majority of street numbers which were last revised in early September following the company's second-quarter fiscal year 2025 results.
Goldman Sachs' projections suggest a robust forward earnings outlook for HealthEquity. The firm's positive stance on the company's ability to achieve its EPS targets is tempered by the current stock valuation.
HealthEquity's stock has demonstrated a significant upward trend in the past month, outperforming the S&P 500 and the Russell 2000 by 11.50 percentage points and 9.10 percentage points, respectively.
The price target of $108.00 reflects Goldman Sachs' expectations for HealthEquity's stock performance over the next 12 months. The firm's neutral stance is influenced by the belief that the potential for positive earnings revisions is already factored into the stock's multiple, which stands at 27.7 times next twelve months (NTM) P/E based on consensus.
Goldman Sachs' initiation of coverage on HealthEquity provides investors with a comprehensive view of the company's financial prospects. The neutral rating indicates a cautious optimism, recognizing both the strengths of HealthEquity's growth strategy and the need to consider its market valuation.
In other recent news, HealthEquity has reported strong financial growth and strategic expansions in its Q2 2025 results. The company experienced a 23% increase in revenue, a 46% rise in adjusted EBITDA, and a 27% growth in Health Savings Accounts (HSAs) assets. Additionally, HealthEquity successfully completed the final part of the BenefitWallet acquisition, adding 216,000 HSAs and $1.0 billion in assets.
RBC Capital Markets and KeyBanc have expressed confidence in HealthEquity's future performance. RBC Capital recently increased its price target for HealthEquity to $100, maintaining an Outperform rating.
The firm cited HSA growth, custodial cash yields, and service costs as core elements expected to drive earnings growth. KeyBanc has maintained its Overweight rating on the company, highlighting HealthEquity's resilience in a declining interest rate cycle.
HealthEquity has also introduced Health Payment Accounts (HPAs) and announced a new $300 million share repurchase program. Looking ahead, the company provided a positive outlook for fiscal 2025, expecting revenue to range from $1.165 billion to $1.185 billion, and adjusted EBITDA to fall between $458 million and $478 million. These recent developments underscore HealthEquity's dedication to growth and innovation.
InvestingPro Insights
To complement Goldman Sachs' analysis, recent data from InvestingPro offers additional insights into HealthEquity's financial position and market performance. The company's market capitalization stands at $8.36 billion, reflecting its significant presence in the healthcare technology sector.
InvestingPro data shows that HealthEquity's revenue grew by 17.19% over the last twelve months, with a notable quarterly revenue growth of 23.15% in Q2 2025. This aligns with Goldman Sachs' projection of strong sales growth. The company's EBITDA also saw impressive growth of 39.34% over the last twelve months, indicating improved operational efficiency.
InvestingPro Tips highlight that HealthEquity is trading near its 52-week high and has shown strong returns over the last month and three months, corroborating Goldman Sachs' observation of the stock's recent outperformance. The company's P/E ratio of 78.67 suggests a high valuation, which supports Goldman's view that positive earnings revisions may already be priced in.
Interestingly, InvestingPro Tips also point out that HealthEquity is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.11. This could indicate potential undervaluation if the company meets its ambitious growth targets.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for HealthEquity, providing a deeper understanding of the company's financial health and market position.
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