BofA Downgrades HealthEquity After 30% Run, Awaits Outcome Of Senate HSA Legislation

Health care savings institution HealthEquity, Inc. HQY's stock has rallied roughly 30 percent since Bank of America Merrill Lynch initiated coverage of the company in May, leading to a downgrade on valuation Thursday.

The Analyst

BofA's Allen Lutz downgraded HealthEquity from Buy to Neutral and increased the price target from $84 to $105.

The Thesis

Senate legislation that would expand the parameters of health savings accounts could add up to 15 percent to HealthEquity's assets under management if passed, Lutz said in the downgrade note.

If the bill isn't approved by Jan. 1, it will need to be reintroduced, he said.

“This is noteworthy given recent polls suggest Democrats have an 80-percent chance of gaining control over the House during the midterm elections," Lutz said. "Even though the HSA bill has bipartisan support, a change in control could extend the bill’s timeline or impact important considerations in the bill, such as the expansion of contribution limits, an item favored by Republicans. We continue to believe a bill has a strong likelihood of passage." 

BofA remains optimistic in HealthEquity's ability to gaine share in a fast-growing market, but the stock has little near-term upside, the analyst said. 

Price Action

HealthEquity shares were down 1.82 percent at $95.16 at the time of publication Thursday.

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