Friday, an investment firm lowered its price target for Accolade Inc. (NASDAQ:ACCD) to $13.00 from $17.00, while retaining a Buy rating on the stock. The adjustment follows the company's mixed fourth-quarter results for fiscal year 2024, which included revenue and adjusted EBITDA that surpassed expectations but were accompanied by a below-consensus revenue guidance for fiscal year 2025.
Accolade's core end-market demand remained robust, with Annual Recurring Revenue (ARR) bookings increasing by approximately 20%. Despite this, the company has forecasted a wider range of potential outcomes for the upcoming fiscal year. The revised price target reflects an enterprise value to sales (EV/sales) multiple of 2.0x based on the firm's fiscal year 2025 estimates.
The company sees a significant long-term opportunity to cross-sell usage-based revenue streams, such as virtual primary care, expert medical opinions, and third-party vendor (TPV) usage revenues to its existing customer base. This strategy aims to grow revenues by up to 50% within the existing customer base over time.
The investment firm acknowledges the margin-enhancing potential of these revenue streams. However, it also notes that the increased mix of usage-based revenues may lead to a wider range of financial outcomes in the short term.
The new price target is set with the expectation that Accolade will continue to expand its revenue streams and capitalize on its strong market demand, despite the uncertainty introduced by the new usage-based business model.
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