Shares of Accolade Inc. lost nearly half their value Friday, after the personalized virtual health care services company reported a wider-than-expected fiscal fourth-quarter loss, and said it would lose its largest customer at the end of the year.
plummeted 42.3% toward a record low in very active afternoon trading, enough to make it the biggest loser listed on major U.S. exchanges. It was also headed for the biggest one-day drop since it went public in July 2020, passing the previous record decline of 13.1% on Jan. 12, 2022.
Trading volume swelled to 20.1 million shares, compared with the full-day average over the past 30 days of about 685,600 shares.
The post-earnings selloff may have been telegraphed by the record 40.2% plunge in the shares of competitor Teladoc Health Inc.
on Thursday, after the telemedicine company reported a very large first-quarter loss and cut its full-year outlook.
Late Thursday, Accolade reported a net loss to the quarter ended Feb. 28 that widened to $34.6 million, or 51 cents a share, from $4.73 million, or 9 cents a share, in the same period a year ago. That missed the average per-share loss estimate of analysts of 40 cents, according to FactSet.
Revenue rose 58.3% to $93.76 million, to beat the FactSet consensus of $91.6 million.
For the fiscal year ended Feb. 28, 2023, the company said it expects revenue between $350 million and $365 million, which compared with the FactSet consensus as of the end of March of $387.9 million.
To make matter worse, the company said “a large customer” had said this month that it would be ending their service relationship at the end of 2022.
Chief Executive Rajeev Singh said that while the loss of that customer comes was disappointing, he said it was an “isolated event” as retention rates have historically been above 95%.
“While there are tailwinds we’re excited about, there are also headwinds,” said Chief Executive Rajeev Singh, according to a FactSet transcript of a post-earnings conference call with analysts. “As you may have inferred from or press release, our relationship with Comcast will effectively end in December 2022.”
The company said in filing in January that Comcast Corp.’s
Comcast Cable was its largest customer.
Singh said on late-Thursday’s call that Comcast, which became a customer 12 years ago, represented less than 10% of revenue, and said that number would have been “materially smaller” next year.
Stifel Nicolaus analyst David Grossman reiterated the buy rating he’s had on Accolade since he started covering it in November 2020, but he slashed his stock price target to $16 from $25.
Regarding Comcast, Grossman said it appears management changes at Comcast resulted in more aggressive pricing requests than Accolade management was willing to provide. And while customer retention remained high, the loss of Comcast suggests “headwinds” could persist into next year.
“Some consultants have indicated that demand for standalone navigation/advocacy offerings have moderated, which could suggest slowing demand underlies competitive pricing,” Grossman wrote in a note to clients. “If true, headwinds are likely to extend beyond [fiscal year 2023], which underscores the importance of [Accolade’s] newer higher-value bundled offering gaining traction in the marketplace.”
Accolade stock has plunged 87.2% over the past 12 months, while Teladoc shares have plummeted 79.9% and the S&P 500 index
has slipped 0.4%.