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HealthEquity - Why The Panic Doesn't Make Sense

Mar. 04, 2020 7:55 AM ETHealthEquity, Inc. (HQY)2 Comments


  • HQY dropped 24% in the past few days along with the broader market sell-off due to the coronavirus panic.
  • The company provided great Q4 performance and provided a strong growth guidance for FY2021.
  • The outbreak doesn't cause any negative impact to HealthEquity's performance. It may increase interchange revenue, if the outbreak worsens in the near future.
  • With growing adoption of HSA by millennials and Generation Z, the Long term growth thesis remains intact.


HealthEquity (NASDAQ:HQY) dropped 24% from its recent high of $87.73 amidst the panic sell-off in the US stock market. This article aims to discuss the opportunity presented by this drop to long term investors.

Source: Google Finance

Coronavirus concerns

Fears of a global pandemic as a result of the coronavirus (COVID-19) outbreak have created a sharp sell-off in global stock markets. Many companies provided an assessment of potential negative impact on their outlook. In the US, the SP500 is down almost 13% from its all time high levels.

Source: Google Finance

I am not discounting the severity of the problem. Every life is precious. However, we are seeing large number of recoveries globally.

Source: Worldometer

Further, there appears some good news as we see the rate of increase of the no. of new cases and deaths to be slowing down.

Source: Worldometer

HSA makes the most sense at a time like this

In the US, coronavirus testing is free. However, there are other costs that a patient must bear such as treatments, medicines, hospital stay, etc. The amount a patient has to pay depends on their health insurance plans.

HSA offers the individuals the ability to save tax free dollars (up to $3550 for single and $7100 for a family) for qualified medical expenses. Further, HSA offers a triple tax advantage - Tax free contributions, Tax free investment of the HSA funds, TAX free withdrawals for qualified medical expenses.

Individuals with a HSA account could pay for these costs using their savings. Now, this may not be of use presently to individuals without HSA, but it is something they can consider for the future.

With 5.3 million HSA accounts and $11.5 Billion in assets, HealthEquity is a leading administrator of health savings accounts. A look into the current trend reveals that

This article was written by

Hidden Opportunities profile picture
Venkat holds a master’s degree in electrical engineering from Washington University in St. Louis. He is an expert in identifying attractive business models with strong fundamentals. He is currently a management consultant for one of the largest professional services firms in the world. He enjoys identifying opportunities that are significantly discounted with capability to generate outsized cash flows. Venkat's main focus today is on high-yield, and dividend-growth stocks for current income and long-term capital gains. Hidden Opportunities is a proud part of the High Dividend Opportunities research team, the #1 marketplace for income seekers on Seeking Alpha.

Analyst’s Disclosure: I am/we are long HQY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (2)

Value Ninja profile picture
I believe the bigger threat to HQY, and perhaps a bigger influence on the shares than Covid-19, is the risk of a Sanders nomination and presidency.

Sanders, in theory, means Medicare For All, which effectively renders HSAs irrelevant.

But I think that is such an unlikely outcome, so the conclusion is the same. HQY has a very bright future.

And Biden's success yesterday should be a positive for the shares today.
Hidden Opportunities profile picture
Hi ValueNinja, thank you for taking the time to read my article.
Back in June 2019, I wrote my opinion on the future of HSA with Medicare-for-all concerns - seekingalpha.com/...
When you get a chance, please read my views. I would be interested in your thoughts.
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