Analyst Stan Berenshteyn of Wells Fargo reiterated a Buy rating on Health Catalyst, reducing the price target to $6.00.
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Stan Berenshteyn has given his Buy rating due to a combination of factors impacting Health Catalyst’s financial outlook. Despite a reduction in revenue guidance, the company’s adjusted EBITDA remains stable, indicating resilience in its core earnings potential. The shift from bundled software solutions to more modular, cloud-based offerings has led to a decrease in average selling prices, but this transition is expected to be margin-neutral as cost savings offset the revenue decline.
Additionally, Health Catalyst has announced a restructuring plan valued at over $40 million, which includes a workforce reduction and contract restructuring. This initiative is anticipated to significantly enhance margins by the fourth quarter, aligning with the company’s guidance for a 20% margin or $15 million in adjusted EBITDA. While new client growth is slower, the company’s strategic adjustments and cost management efforts are expected to sustain its financial health, justifying the Buy rating.