Health Catalyst slips as RBC Capital Markets downgrades citing hospital headwinds

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Health Catalyst, Inc. (NASDAQ:HCAT) dropped ~7% pre-market Tuesday after RBC Capital Markets lowered its rating on the healthcare software company and slashed its price target to $9 from $19 per share in reaction to challenges faced by the hospital industry.

Hospital stocks crashed on Friday after the Q3 2022 results of Tenet Healthcare (THC) and HCA Healthcare (HCA) disappointed investors. South Jordan, Utah-based HCAT provides data and analytics solutions to healthcare organizations.

"….results from hospitals that reported Q3 results thus far show the challenges providers are facing do not appear to be abating," RBC analysts led by Sean Dodge wrote, downgrading Health Catalyst (HCAT) to Sector Perform from Outperform.

However, the analysts remain optimistic about the company's competitive position and its potential to benefit from long-term structural tailwinds in healthcare, such as rising costs and shift to value-based care.

However, citing HCAT's management commentary and guidance during the Q2 update, Dodge and the team expect slower near-term revenue growth and a longer path for the company to achieve sustained profitability.

Wall Street has remained bullish on Health Catalyst (HCAT) stock, with an average rating of Buy from analysts in line with Seeking Alpha Author ratings. However, Seeking Alpha's quant system, which consistently beats the market, rated HCAT as a Strong Sell.