Why Healthequity Inc (NASDAQ: HQY) stock is crashing

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Healthequity Inc (NASDAQ: HQY) stock lost over 10.4% on 3rd June, 2020 (as of 10:00 am GMT-4; Source: Google finance) after the company posted lower than expected results for the first quarter of FY 21. The company has reported non-GAAP net income of $30.8 million for the period, which represents an increase of 12% compared to non-GAAP net income of $27.4 million in Q1 FY20.

Moreover, HSAs at the end of April, 2020 increased 33% year over year to approximately 5.4 million, including 245,000 HSAs with investments, which represents an increase of 38% year over year. Total Accounts at the end of April, 2020 had reached 12.7 million, including 7.3 million consumer-directed benefit accounts. Total HSA Assets at the end of April, 2020 rose 38% year over year to $11.5 billion. Total HSA assets included $8.7 billion of HSA cash and $2.8 billion of HSA investments. Client-held funds, which are deposits held on behalf of our Clients to facilitate administration of our CDBs, and from which the company gets custodial revenue, were $0.9 billion at the end of April, 2020. Further, the company has reported sales of 104,000 new HSAs in the first quarter of 2020, which is 17% more than in the first quarter of 2019. HSA members grew their cash balances by about $40 million during the first quarter, while total member balances declined by about $37.0 million due to the impact of market declines on invested balances, which was partially offset by net contributions from cash balances to investments.

HQY in the first quarter of FY 21 has reported the adjusted earnings per share of 43 cents, missing the analysts’ estimates for the adjusted earnings per share of 44 cents, according to Zacks Investment Research. The company had reported the adjusted revenue growth of 118 percent to $190 million in the first quarter of FY 21, missing the analysts’ estimates for revenue of $192.5 billion. The company delivered service revenue of $111.3 million, custodial revenue of $46.9 million, and interchange revenue of $31.8 million. The company posted Adjusted EBITDA of $63 million for the first quarter of 2020, which represents an increase of 62% compared to $38.9 million for the first quarter of 2019. Adjusted EBITDA contracted to 33% of revenue compared to 45% for the first quarter ended April 30, 2019.

For the current quarter ending in August, HealthEquity expects its per-share earnings to be in the range of 23 cents to 30 cents.

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