Why Phreesia Stock Plummeted by 23% Today
Key Points
Investors enthusiastically traded out of the stock, despite its good performance across all three business lines.
It also beat analyst revenue and net income estimates.
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The stock of healthcare provider services specialist Phreesia (NYSE: PHR) wasn't looking all that healthy on Tuesday. Investors were clearly displeased with the company's latest quarterly earnings release, and they expressed this sentiment by selling their stock. It fell by more than 23% that trading session.
Double-digit improvements
Phreesia published its third quarter of fiscal 2026 figures after market close Monday; these revealed that revenue rose by 13% year-over-year to slightly over $120 million. That was on the back of a 7% growth in the average number of healthcare services clients -- an important operational metric for the company -- to 4,520.
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On the bottom line, Phreesia flipped to a net profit according to generally accepted accounting principles (GAAP) of nearly $4.3 million ($0.07 per share), from the year-ago loss of $14.4 million.
Both headline figures beat the consensus analyst estimates. On average, pundits tracking the stock were expecting slightly under $120 million for revenue and break-even on the bottom line.
In its earnings release, Phreesia said that all three of its revenue streams -- subscription and related services, network solutions, and payment processing -- grew at low double-digit rates during the period (by 12%, 14%, and 11%, respectively).
Revenue guidance still falls short
Phreesia also tightened its full-year 2026 guidance. It now anticipates revenue of $479 million to $481 million, compared to a previous outlook of $472 million to $482 million. However, analysts are expecting almost $486 million.
Non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) is now forecast at $99 million to $101 million. That's up from the preceding range of $89 million to $92 million.
The extremely negative investor reaction to the quarter seems overblown, as the only obvious culprit is a not particularly drastic revenue guidance miss. Yes, the company is very pricey (at a forward P/E of 333), but still, that impressive flip into profitability portends better times ahead for the formerly habitual loss-maker. I'd consider this stock for a buy on weakness.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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