UPDATE: Morgan Stanley Initiates Coverage on Castlight Health on Good Market Position
In a report published Tuesday, Morgan Stanley analyst Jennifer Swanson Lowe initiated coverage on Castlight Health (NYSE: CSLT) with an Equal-Weight rating.
In the report, Morgan Stanley noted, “Companies are struggling with growing healthcare costs, and Castlight's tools offer a way for HR managers to reign in the cost and improve the quality of care. The market for these solutions is relatively new, but early signs of adoption are encouraging and the market opportunity is potentially large. Castlight's business also remains in early days with only $13M of revenue in CY13, but with key reference customers like Wal-Mart and Microsoft onboard and a strong product offering, we see significant growth ahead.
"That said, while we are optimistic about the opportunity, our DCF-derived base case of $24 already assumes that Castlight can grow revenue at a 15-year CAGR of 44% to $3.0B, or ~40% of the expected market in CY28, with 22% op. margins. We think this is achievable, but the potential for further near-term upside from here may be limited while the current relative multiple of 14.5x EV/CY16 Sales also represents a premium to peers, and we initiate coverage at Equal-weight.”
Castlight Health closed on Monday at $19.49.
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