Accolade, Inc Is Poised For A Major Rebound
Accolade, Inc (NASDAQ: ACCD) caught our attention last year after it IPOd. The company is a business-services provider that offers a cloud-based platform that helps employees understand and utilize their healthcare benefits. The company’s revenue has been steadily growing with no end in sight but there is a problem weighing on shares. The growth and guidance are nothing more than what was expected and have left the door open to short-selling, profit-taking, and generally bearish market activity.
That said, insider confidence in the stock remains high at 10.5%. The insiders sold some shares earlier in the year but there has been no buying or selling in the time since. Institutional activity, however, has been robust over the past year and certainly points to higher share prices in the quarters and years ahead. Insidertrades.com data shows the institutions have been overwhelmingly bullish on the stock buying more than $1.3 billion worth over the past year compared to only $132 million in sales. Net buying is worth more than $1.1 billion or roughly 91% of the market cap with shares trading near $24.40. This brings the net of ownership up to 67.9% and total insider and institutional holdings to about 78%.
The Analysts Are Souring On Accolade, Inc
The analysts are overwhelmingly bullish on Accolade, Inc but the sentiment in regards to the share price is souring. The main driver of the recent shift in sentiment is the outlook for growth and now the guidance. The company issued guidance for Q3, FY 2021, and FY 2022 that is mixed at best. The guidance for the coming quarter is weaker than the consensus estimates and expected to offset strength seen earlier in the year. Execs put revenue at $90 to $93 million which is a sequential increase of only 1.5% compared to the consensus of $97 million. As for next year, the company is expecting 25% YOY growth or a significant deceleration from this year’s triple-digit pace.
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There are 11 analysts covering the stock and 5 of them came out with price target reductions in the wake of the report. They have the stock trading in the range of $30 to $35 which is well below the consensus of $42.90. The consensus implies about 75% of upside for the stock but has come down noticeably over the past 90 and 30 day periods. The $30 low price target still implies about 22% of upside but it may move lower before it starts moving higher again.
Short-Covering Begins In Accolade, Inc Shares
The short interest in Accolade shares wasn’t high enough to be mind-boggling but the 7.8% indicated at the start of the month is enough to fuel a nice short-covering rally. Price action is already moving higher in response to the report, the question is whether the shorts will reposition themselves or begin to close out their positions? In our view, the company’s business is robust despite the weak guidance so the sell-off in share prices will eventually lead to a sharp reversal and rebound.
On a technical basis, the downtrend in Accolade is still intact so we are expecting to see more volatility. The good news is the 25% increase in share prices sparked by the earnings report is a bullish indicator and one we see leading to at least sideways trading if not a reversal. The short-term EMA will probably provide resistance and cause a dip in prices that could retest the recent lows. Longer-term, we see range-bound trading and consolidating leading to higher prices later in the year once sentiment and outlook come back into alignment.
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