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Jefferies reveals a health stock that could rally 30% this year

Jefferies analyst says Healthequity Inc has upside to $84 a share.

Glen Santangelo explained his bullish call in a research note today.

Healthequity stock is currently up 7.0% versus the start of 2023.

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Year-to-date, Healthequity Inc (NASDAQ: HQY) hasn’t been very exciting for its shareholders but the story moving forward will likely be a different one, says a Jefferies analyst.

Healthequity stock has upside to $84

On Thursday, Glen Santangelo said the financial technology stock had upside to $84 – about a 30% premium on its current price.

The analyst reiterated his “buy” rating on Healthequity stock today citing the company’s strong footprint in health savings accounts. His research note reads:

With a couple of rate increases and positive preannouncements the past couple of months, we see near-term upside. As outlook for rates continues to shift to higher for longer, HQY is not getting credit for the more beneficial environment.

Healthequity is expected to earn 20 cents a share in its current financial quarter versus 9 cents per share a year ago.

Healthequity is the provider of choice

Healthequity ranked above rivals Optum and Fidelity and was named the provider of choice in a recent Jefferies survey.

According to Glen Santangelo, the health stock has significant room for growth considering HSAs have not even penetrated 80% of the employer market yet. The said survey also revealed that over 60% of respondents expect increased HSA adoption this year.

The current consensus estimates underappreciate the impact of higher rates in fiscal 2025 (calendar year 2024). If rates hold at current level, HQY could generate > 250bps of incremental yield on cash.

The Utah-based company managed HSA assets worth $18 billion in 2021. Versus the start of the year, Healthequity stock is up about 7.0% at writing.

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