Healthequity (HQY): A Strong Buy on Digital Wallet Expansion and Enhanced Profitability

Analyst Stan Berenshteyn of Wells Fargo assigned a Buy rating on Healthequity (HQY – Research Report), boosting the price target to $105.00.

Stan Berenshteyn has given his Buy rating due to a combination of factors centered around Healthequity’s (HQY) potential to leverage digital wallets to generate new revenue streams and increase profitability. Berenshteyn projects that through digital wallets, HQY is well-placed to introduce savings solutions and standardize Buy Now, Pay Later (BNPL) services, which could significantly expand their serviceable market. The estimated increase in EBITDA from these initiatives is considerable, ranging between $310MM to $550MM, highlighting a robust growth trajectory for the company’s earnings before interest, taxes, depreciation, and amortization.
Additionally, the introduction of AI-powered cost savings is anticipated to reduce the cost of goods sold by $50MM to $140MM, further bolstering HQY’s financial position. Berenshteyn’s analysis suggests that adopting digital wallets could enhance member interaction efficiency, thereby reducing operating expenses over the long term. These factors, combined with a revised price target of $105, reflect a significant potential upside from the previous target and are supported by a comprehensive valuation approach, merging both discounted cash flow and EV/EBITDA methodologies. This holistic view of HQY’s future revenue and cost-saving opportunities underpins the confidence in the Buy rating.

According to TipRanks, Berenshteyn is a 2-star analyst with an average return of 1.2% and a 56.25% success rate. Berenshteyn covers the Healthcare sector, focusing on stocks such as Omnicell, Healthequity, and GoodRx Holdings.

In another report released on April 30, Barclays also assigned a Buy rating to the stock with a $104.00 price target.

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Healthequity (HQY) Company Description:

HealthEquity, Inc. provides range of solutions for managing health care accounts. The firm’s offers its solutions for employers, health planbs, brokers, consultants and financial advisors. Its services include HAS, FSA, HRA, DCRA, 401(k), Commuter, COBRA and HIA. It also offers products like healthcare saving and spending platform, health savings accounts, investment advisory services, reimbursement arrangements, and healthcare incentives. The company was founded by Stephen D. Neeleman on September 18, 2002 and is headquartered in Draper, UT.