Castlight Health Has $10B Potential Market, William Blair Says In Bullish Initiation

Castlight Health Inc CSLT is a market leader with numerous effective growth channels and an attractive financial profile, according to William Blair. 

The Analyst

William Blair analyst Jeffrey Garro initiated coverage of Castlight with an Outperform rating.

The Thesis

By combining sick care and well-being guidance, Castlight has emerged as a market leader in health navigation, with over 80 Fortune 500 clients, Garro said in the Wednesday initiation note. (See the analyst's track record here.)

William Blair estimates the annual healthcare navigation opportunity could reach $10 billion by 2021, and Garro said Castlight has only penetrated 2 percent of this potential market. 

“The cost problem in health care continues to garner headlines regularly, and Castlight delivers solutions for this big problem.”

The company has access to numerous growth channels and has an opportunity to increase average revenue per customer by increasing adoption of the full suite of products, Garro said. 

Castlight’s partnership with Anthem Inc ANTM — the largest U.S. commercial health insurance company — is helping the company expand its addressable market to include fully insured employers and could help drive new account penetration, the analyst said. 

The company has a strong financial profile, with subscription gross margins above 80 percent and a long-term target of 20-percent adjusted operating margins, according to William Blair. 

Price Action

Castlight shares were rallying 9.8 percent to $4.20 at the time of publication Wednesday afternoon. 

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