HealthEquity Stock: Leading Health Savings Account Investment

Key Points

• HealthEquity is one of the nation’s largest health savings account (HSA) administrator platform providers, with a 20% market share.
• HealthEquity reported a fiscal Q1 2025 EPS beat of 14 cents and 17.7% YoY revenue growth to $287.6 million, beating $277.91 consensus estimates.
• HealthEquity grew its HSA members by 13% to 9.1 million.

HealthEquity Inc NASDAQ: HQY is one of the nation’s largest providers of health savings accounts (HSA) and consumer-directed benefits (CDB) services. Its platform enables individuals to open, transfer, and conveniently manage HSAs and businesses to administer them seamlessly. They also provide flexible spending accounts (FSAs) and health reimbursement arrangement (HRA) plans.

The company operates in the medical sector and competes with other providers of HSAs, including UnitedHealth Group Inc. NYSE: UNH, Webster Financial Co. NYSE: WBS  and Fidelity National Financial Inc. NYSE: FNF.

What is a Health Savings Account?

An HSA is a tax-advantaged member-owned account that lets individuals save pre-tax dollars to use for future qualified medical expenses. The funds can be invested tax-free into mutual funds, and they never expire. HSAs are available to individuals with a high-deductible health plan (HDHP). HDHPs usually have catastrophic coverage. Premiums, deductibles, and co-pays can be paid from your HSA. HSA funds don't expire and roll over annually regardless of whether you change employers, health plans, or retire. Many individuals treat HSAs like a 401k plan to invest in tax-free.

HSA funds can be used to pay for some Medicare expenses, including Medicare Part B, Part D, and Medicare Advantage plan premiums, deductibles, co-pays, and co-insurance. However, they can no longer be contributed to once enrolled in Medicare. HSAs can’t be used to pay for Medigap premiums.

What is a Flexible Spending Account?

Pre-tax payroll contributions fund flexible spending accounts (FSAs), which can be used to spend tax-free money on qualified medical expenses. FSAs use traditional health plans, which have lower deductibles and higher premiums. Individuals can select between health insurers offered by the employer. FSAs don't cover premium payments, and funds must be spent annually as they don't roll over and do expire.

FSAs aren't owned by individuals and don't enable the investment of funds. The biggest advantage to an FSA is that the whole balance is accessible on day one, acting like a cash advance from the employer. The employer owns the account, and unused funds are typically returned to the employer at the end of the plan year, subject to the employer's terms.

HQY Triggers a Daily Bull Flag Breakout Pattern

The daily candlestick chart on HQY depicts a bull flag breakout pattern. The flagpole formed on the parabolic price surge from $62.10 on Dec. 15, 2023, to $84.13 on Feb. 27, 2024. The flag formed after that based on the parallel lower highs and lower lows, reaching a low of $74.75 on May 15, 2024. HQY triggered the bull flag on the breakout bounce through the upper trendline resistance at $80.01, driven by its robust Q1 2024 earnings report. The daily relative strength index (RSI) has coiled at the 68-band. Pullback supports are at $81.98, $80.01, $76.62 and $74.75.

A Solid Fiscal Q1 2025 Earnings Report for HealthEquity

HealthEquity reported a Q1 2025 beat by 15 cents. Net income rose to $28.8 million, up from $4.1 million in the year-ago period. Adjusted EBITDA was $117.4 million, up 36% YoY. Revenues surged 17.7% YoY to $287.6 million, falling short of the $277.91 million consensus estimates. HealthEquity had 9.1 million HSAs, up 13% YoY. Total HSA assets were $27.3 billion, up 22% YoY. The total accounts are split between HSAs and CDBs.

HealthEquity's Upside Guidance

HealthEquity issued upside guidance for fiscal 2025 EPS of $2.93 to $3.10 versus $2.90 consensus analyst estimates. Full-year 2025 revenues are expected to be between $1.16 billion and $1.18 billion versus the consensus estimates of $1.16 billion.

HealthEquity CEO Jon Kessler commented, "Record first quarter HSA sales, greater Enhanced Rates adoption, and timely transition of two of three BenefitWallet tranches made for a great team start to fiscal 2025."

Kessler concluded, "With momentum on both growth and margins, we are raising full-year guidance and pushing forward our platform investments to deliver remarkable experiences, deepen partnerships, and drive member outcomes."

HealthEquity analyst ratings and price targets are on MarketBeat.