KeyBanc Upgrades Inovalon, Remains Bullish On Future Expectations

Inovalon Holdings Inc INOV has reported several quarters of strong bookings and appears poised to deliver positive financial surprises going ahead, after years of posting disappointing results, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Donald Hooker upgraded Inovalon to Overweight while maintaining a price target of $22.

The Thesis

After a few years of Inovalon underperforming financial expectations, the stock seems to have been “left for dead” by investors, Hooker said in the note.

He added, however, that the company could beat expectations going ahead, as it seems to be back on a growth trajectory and Street estimates remain low.

Inovalon has generated an annualized contract value of $156 million, representing 70% year-on-year growth. This includes a series of deals with UnitedHealth Group Inc UNH, Molina Healthcare, Inc. MOH and Humana Inc HUM.

The company could generate revenues of more than $700 million in 2019, of which more than 80% could consist of recurring subscription fees in growing verticals, like Medicare Advantage, Hooker said.

The analyst believes Inovalon could achieve revenue growth in 2020, along with around 50 basis points of EBITDA margin expansion, driven by economies of scale on G&A (general and administrative) expenses.

Price Action

Shares of Inovalon were up 3.71% at $16.22 at the time of publishing.

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