Market Overview

Core Growth At Inovalon Slackening, Morgan Stanley Says In Downgrade

Share:
Core Growth At Inovalon Slackening, Morgan Stanley Says In Downgrade
Related INOV
75 Biggest Movers From Yesterday
65 Stocks Moving In Thursday's Mid-Day Session

Inovalon Holdings Inc (NASDAQ: INOV), a technology company providing cloud-based platforms to the health care industry, is beset by client losses, ACA headwinds and pricing concerns, an analyst at Morgan Stanley said.

The Analyst

Morgan Stanley's Ricky Goldwasser downgraded Inovalon from Equal-weight to Underweight and lowered her price target from $15 to $10.

The Thesis

Inovalon's return to 10 percent organic growth could now take longer than expected, given a contract loss post September 2017, ACA headwinds and CFO departure, Goldwasser said in a note.

Although the recently announced Ability acquisition gives the company entry into the highly competitive revenue cycle management, or RCM, market, the leverage arising out of the deal will likely limit M&A in the near to mid-term, the analyst said.

The analyst sees Inovalon's organic revenue growth profile to be capped at 6-9 percent, as market saturation, and unwinding of the ACA represent headwinds to growth.

As such, Morgan Stanley lowered its long-term growth rate in its DCF model from 10 percent to 7.5 percent, with the terminal growth estimate maintained at 15 percent.

To reflect the ABILITY deal, the firm raised its 2018 and 2019 top-line estimates from $478 million and $531 million, respectively to $572 million and $648 million, with 3 percent and 5 percent growth contributed organically.

The Price Action

Inovalon shares are down about 2.5 percent over the past year. Reacting to the downgrade, shares fell 6 percent to $11.18.

Related Links:

14 Health Care, Managed Care Stocks To Put On Your Radar

3 Likely Health Care Disruptors In 2018

Latest Ratings for INOV

DateFirmActionFromTo
Nov 2018Wells FargoMaintainsMarket PerformMarket Perform
Mar 2018Morgan StanleyDowngradesEqual-WeightUnderweight
Feb 2018Wells FargoMaintainsMarket PerformMarket Perform

View More Analyst Ratings for INOV
View the Latest Analyst Ratings

Posted-In: Morgan Stanley Ricky GoldwasserAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (INOV)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
QRVOKeyBancDowngrades0.0
SWKSKeyBancDowngrades0.0
CMAB. Riley FBRDowngrades84.0
COFBairdUpgrades101.0
CORJefferiesDowngrades102.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Chipotle's Chief Marketing And Strategy Officer Resigns

Vetr Crowd Upgrades Constellation Brands