KeyBanc analysts downgraded Progyny (NASDAQ:PGNY) to Sector Weight from Overweight after the company slashed its guidance for full-year revenue, which resulted in a stock price drop of more than 25% pre-market today.
The analysts cited several reasons for the downgrade: first, growing concerns about the company’s ability to predict its revenue, utilization rates, and customer behavior, especially following a revenue miss of about 4% in Q1, which came after a subdued forecast given in late February. Secondly, the analysts noted softening utilization trends compared to the previous year, which could mean that new client cohorts may not reach the utilization levels of existing ones. Thirdly, they anticipate a challenging selling season ahead, compounded by tighter budget constraints.
While previously believing that Progyny deserved a premium multiple based on its healthy growth prospects, the analysts now adjusted their revenue growth forecast to approximately 14% for this year and 10% for the next, due to less confidence in sustained growth. They mentioned that a more positive stance on Progyny could be reconsidered if there is an improvement in utilization trends and if management can gain better insight into customer behaviors and overall business dynamics.