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

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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