Accolade Analyst Finds Stock Attractively Valued Post Q3 Beat, T-5 Contract Win

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  • Needham analyst Ryan MacDonald reiterated a Buy rating on Accolade, Inc ACCD and set a price target of $15.00.
  • The re-rating reflected Accolade's strong 3QF23, in which revenue and adjusted EBITDA beat consensus expectations, driven by PG upside and stable member counts
  • Total revenue grew 9.0% Y/Y, primarily due to strength in direct-to-consumer offerings and resilient member counts at commercial accounts, which have remained strong despite the macro environment.
  • Assuming ACCD cared for only chronic care members in the two regions, the analyst estimated ACCD's revenue opportunity to be $24.5 million. But management disclosed that current military relationships yield about $10 million in annual revenue, and inclusion in the T-5 contract could be "4x-5x" the current relationship. Therefore, the analyst views his base-case estimate as conservative.
  • Announcements on the call highlighted ARR bookings, which are poised to finish the year up over 30% Y/Y, and the T-5 contract, which could enable Accolade to win business in both regions and generate solid upside from its $10 million annual government revenue stream.
  • When combining these factors with a solid preliminary FY24 guide and recommitment to the FY25 breakeven target, ACCD's shares are attractively valued and set up to outperform in CY23, the analyst said.
  • Price Action: ACCD shares traded higher by 28.17% at $9.92 on the last check Tuesday.
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