Raymond James Upgrades HealthEquity to Strong Buy Despite Fraud Concerns

Raymond James upgraded HealthEquity (NASDAQ:HQY) from Outperform to Strong Buy, setting a new price target of $115, slightly below the previous $120, citing confidence in the company’s ability to resolve near-term challenges despite ongoing industry-wide fraud risks.

The analysts acknowledged that increased fraud-related costs have led to reduced estimates, but emphasized that the issue is affecting financial institutions across the board, not just HealthEquity. Recent data shows a notable rise in attempted fraud incidents across banks and fintech firms, with over 35% reporting more than 1,000 attempts and two-thirds experiencing year-over-year increases.

Despite these pressures, Raymond James maintains a bullish outlook, expecting HealthEquity’s management to effectively mitigate current fraud issues in the near term. The firm also highlighted disclosures from the company’s recent 10-K filing, which confirmed that no known cybersecurity threats have had a material impact on operations or are expected to in the foreseeable future.

Raymond James sees the underlying fundamentals and strategic positioning of HealthEquity as strong, and believes the stock’s current levels offer an attractive opportunity for long-term investors, even amid short-term headwinds.