Citi cuts Phreesia stock price target to $33 from $35, keeps Buy rating

Citi analyst Daniel Grosslight lowered Phreesia's (PHR) price target to $33 from $35, maintaining a Buy rating, after the company's Q1 2025 results showed solid overall revenue growth of 15% year-over-year to $115.9 million, slightly above expectations. While Network Solutions growth was slower than anticipated, Subscription and Payments revenue performed strongly, contributing to an adjusted EBITDA that exceeded estimates by $3-4 million due to SG&A efficiencies. Phreesia raised its full-year adjusted EBITDA guidance to $85-$90 million, reflecting confidence in its financial trajectory.

Analysis

Phreesia Inc. (NYSE:PHR) recently reported fundamentally solid financial results, leading Citi to maintain a Buy rating despite a slight reduction in its price target to $33.00 from $35.00. The company's Q1 2025 revenue reached $115.9 million, a 15% year-over-year increase and slightly ahead of the $114.92 million consensus, contributing to a robust 17.8% revenue growth over the last twelve months and an impressive 27% five-year CAGR. While the Network Solutions segment exhibited slower growth than anticipated, increasing 15.5% year-over-year but declining 5% quarter-over-quarter, this was effectively offset by stronger performance in Subscription and Payments revenue, including a $1 million contribution from one-time services. Notably, Phreesia's provider revenue benefited from upselling subscription modules and attracting larger clients. Annual Healthcare Service Checks (AHSCs) grew 8.5% year-over-year, in line with projections, and provider revenue per AHSC rose 5.2%, surpassing expectations by 3%. Phreesia's adjusted EBITDA exceeded estimates by $3 million to $4 million, driven by SG&A efficiencies that counteracted lower-than-expected payments gross margins (partially due to a one-time $170,000 interchange fee) and increased R&D spending. The company achieved an earnings per share of -$0.07, outperforming the -$0.12 forecast, and generated positive operating cash flow of $14.9 million and free cash flow of $7.5 million, with an adjusted EBITDA margin of 18%. Demonstrating confidence, Phreesia maintained its FY26 revenue growth guidance of 12%-15% and raised its adjusted EBITDA guidance to a range of $85 million to $90 million, up from $78 million to $88 million. This outlook is supported by ongoing client acquisition, with 70 new healthcare services clients added in the quarter, and a strategic focus on AI integration and product innovation.

Key Decisions for Investors

• Given Phreesia's earnings beat, raised EBITDA guidance, strong cash flow generation, and a valuation appearing undervalued relative to analyst targets (Citi: $33), investors may find the stock an attractive opportunity despite Citi's modest price target trim.
• Investors should closely monitor the growth trajectory of the Network Solutions segment, as its recent deceleration represents a key area to watch, although currently mitigated by strength in other revenue streams.
• The company's ability to sustain momentum in upselling, acquiring larger clients, and realizing SG&A efficiencies will be critical for achieving its enhanced EBITDA targets and validating the positive operational narrative.