HealthEquity Q2 Results Suggest Growing Market Share

Shares of Healthequity Inc HQY rose more than 3 percent to $35.32, near to its 52-week high of $35.78, following better-than-expected quarterly results. Baird said the strong results suggest growing market share.

For the second quarter, non-GAAP EPS of $0.16 came in above Baird/consensus estimates of $0.14/$0.13 and revenue climbed 44.9 percent to $44.2 million, topping Baird/consensus estimates of $43.7 million/$43.3 million.

Further, health savings account members grew 50 percent to 2.3 million, and total AUM increased 60 percent to $4.2 billion.

"Momentum continues to build for HQY's differentiated solution as HQY continues to gain market share, growing HSAs and AUM at 2-3x the industry growth rates," analyst Mark Marcon wrote in a note.

Though the Service Fee decline quickens, the analyst said the trade-off is being leveraged through ramp up of higher margin Custodial and Interchange Fees. In addition, Marcon sees further room for margin expansion.

The company raised its fiscal 2017 revenue estimate to $174-$178 million from $173-$177 million, and sees GAAP EPS $0.38-$0.42.

The analyst also raised his estimate for revenue/non-GAAP EPS estimates to $178.0 million/$0.53 (consensus $176.4 million/$0.48). The analyst's earlier estimates were $176.7 million/$0.49.

Marcon reiterated its Neutral rating, solely based on valuation. Marcon also upped his price target on the stock to $35 from $31.