Evercore ISI downgraded Health Catalyst (NASDAQ:HCAT) from Outperform to In Line and lowered its price target from $6.00 to $4.00, citing rising uncertainties around the company’s near- and long-term outlook. As a result, the company’s shares dropped around 4% intra-day today.
While shares have already experienced a notable decline in 2024, Evercore believes further downside risk remains, particularly due to challenges in the company’s earnings and revenue trajectory. The updated price target reflects a valuation of 8x estimated 2025 EBITDA.
In the short term, Evercore highlights several factors likely to pressure results. These include transitional costs related to the company’s exit from its unprofitable ambulatory TEMS pilot program and the near-term margin drag associated with onboarding 10 new platform clients in Q1. While both moves could support margin recovery later in the year, they are expected to weigh on first-quarter performance.
Looking further out, the firm notes that although hospital IT spending remains positive, it has softened from previous highs. Additionally, macro risks are beginning to surface, including the potential for reduced Medicaid coverage and increased expenses tied to tariffs on medical supplies and pharmaceuticals. These pressures may limit revenue growth while compressing margins.
Evercore acknowledges that Health Catalyst could benefit from initiatives like Ignite platform migrations and improved TEMS profitability. However, these gains may only partially offset the broader financial drag.