On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted its price target for HealthEquity, Inc (NASDAQ:HQY), a leading provider of Health Savings Accounts (HSAs), to $103.00, up from the previous target of $102.00. The firm continues to recommend a Buy rating for the stock following HealthEquity's impressive financial performance in the second quarter.
HealthEquity reported a robust second quarter, with total revenue reaching $299.9 million, surpassing the analyst consensus estimate of $285.1 million. This success was attributed to widespread strength across the company's Service, Custodial, and Interchange segments. Notably, Custodial revenue experienced a significant year-over-year increase of 50%, climbing to $138.7 million, which was fueled by better-than-expected yields and growth in HSA assets.
Additionally, Service revenue exhibited a 4% year-over-year growth, outperforming the projected 1% increase. This was partially due to a rise in total accounts and invested assets, although a shift towards HSAs resulted in a lower average unit service revenue. Interchange revenue also exceeded expectations, with a 14% increase compared to the anticipated 1% decline, driven by members using their payment cards more actively.
The company's growth was not limited to revenue alone. HealthEquity saw a 15% increase in HSA members, ending the quarter with 9.4 million individuals. HSA assets grew by 27% to $29.5 billion, and the total number of accounts rose by 9% to 16.3 million, bolstered by organic sales and the acquisition of BenefitWallet.
HealthEquity also improved its gross margin by approximately 60 basis points from the previous year. This, along with operational cost efficiencies, especially in research and development, led to an adjusted EBITDA of $128.3 million, which was well above the consensus forecast of $111.9 million. The company's financial health and upward momentum were key factors contributing to the positive outlook from Deutsche Bank.
In other recent news, HealthEquity, Inc. witnessed a promising second quarter, with revenues reaching $299.9 million, a 23% increase from the previous year. This surpassed both BTIG's and consensus estimates.
The company's adjusted EBITDA also saw a significant increase, reaching $128.3 million, a 46% increase from the previous year. Following these strong results, BTIG upgraded HealthEquity's stock target to $110, while BofA Securities adjusted its price target to $100, both maintaining a Buy rating.
In response to the robust quarter, HealthEquity revised its full-year guidance for fiscal 2025 upwards for both revenue and adjusted EBITDA. HealthEquity also reported adjusted earnings of $0.86 per share, exceeding the projected $0.70 per share. Lastly, HealthEquity announced a $300 million share repurchase program, demonstrating confidence in its financial position and growth trajectory.
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