Why Are Health Catalyst (HCAT) Shares Soaring Today

Max Juang /
2023/12/19 11:42 am EST

What Happened:

Shares of healthcare software provider Health Catalyst (NASDAQ:HCAT) jumped 6.5% in the morning session, reflecting the broader market's ongoing uptrend, which some may playfully call the Santa Claus rally (a real observed phenomenon where the market tends to drift upwards during the holiday season for reasons such as optimism and year-end tax considerations for funds and investors). All major indices rose, fueled by growing optimism about the Federal Reserve not only concluding its rate hikes but cutting in 2024. Easing inflation has been the catalyst for this change in tone from the Fed. During the December 2023 Fed meeting, committee members signaled for at least three quarter-point rate cuts in 2024, roughly aligning with market expectations but more accommodative than Fed officials' previous statements. This has set the stage for a soft landing scenario, where inflation comes under control without damage to the economy that could hurt overall consumer demand. 

As a reminder, lower rates are good for stock valuations, especially for tech companies where the market needs to discount back cash flows further out in the future. When the math is done to discount these cash flows back to today, a lower assumed discount rate leads to higher present values.

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What is the market telling us:

Health Catalyst's shares are very volatile and over the last year have had 29 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 9 months ago, when the company gained 9% on the news that analyst Stan Berenshteyn of Wells Fargo upgraded the stock's rating from Equal-Weight (Hold) to Overweight (Buy) and raised the price target from $13 to $16. 

Health Catalyst is down 11.4% since the beginning of the year, and at $9.22 per share it is trading 37.5% below its 52-week high of $14.76 from February 2023. Investors who bought $1,000 worth of Health Catalyst's shares at the IPO in July 2019 would now be looking at an investment worth $235.13.

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