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Underwriters Launch Coverage On Healthequity With Outperform

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Healthequity (NASDAQ: HQY) saw coverage initiated at Outperform Monday by at least four investment banks that served as underwriters of the company's initial public offering.

Shares were down nearly three percent in late trading.

The company, which offers health care savings accounts and related services, held its $133 million initial public offering July 31, opening at $14 a share. The company traded recently at $19.82, down from a peak earlier this month of $21.48.

The company's quiet period expired Sunday.

Raymond James, J.P. Morgan and Wells Fargo all were underwriters along with SunTrust, and all four firms offered high ratings to the stock Monday.

Raymond James' C. Gregory Peters said the increasingly high deductibles of many employer health care plans insures a growing demand for health care savings accounts, which typically offer tax advantages and which are designed to cover the gap.

It's a sector growing at 37 percent annually since 2004 and Peters expects that rate to continue for the foreseeable future.

Moreover, rising interest rates (when and if they materialize) would be accretive to shares. The company has $1.5 billion in assets under management through its healthcare savings accounts. Peters figures that will grow 30 percent both this year and in 2015.

The company is designated as a "non-bank trustee" by the U.S. Treasury Department, enabling it to act as a custodian for each savings account.

On the side, it offers clients an investment advisory service, and generates revenue from account administration, custodial services and a 1.4 percent transaction fees each time the account is used.

Healthcare savings accounts are currently exempt from a $0.22 per transaction cap on other forms of payment cards currently imposed by the Federal Reserve.

The fees amounted to 19 percent of Healthequity's revenue last year.

Shares closed Monday at $19.94, down $0.52.

Latest Ratings for HQY

DateFirmActionFromTo
Aug 2014Raymond JamesInitiates Coverage onOutperform
Aug 2014JP MorganInitiates Coverage onOutperform
Aug 2014SunTrust Robinson HumphreyInitiates Coverage onOverweight

View More Analyst Ratings for HQY
View the Latest Analyst Ratings

Posted-In: JP Morgan Raymond James SunTrust Wells FargoAnalyst Color Initiation IPOs Analyst Ratings

 

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