HealthEquity (HQY) Declined After Reporting Quarterly Results

Soumya Eswaran

Mon, May 12, 2025, 5:05 AM 3 min read

Baron Funds, an investment management company, released its “Baron Health Care Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned 2.54% (Institutional Shares) in the quarter compared to a 3.87% gain for the Russell 3000 Health Care Index (benchmark) and a 4.72% decline for the Russell 3000 Index (the Index). The fund trailed the benchmark due to stock selection and, to a lesser extent, active sub-industry weights. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron Health Care Fund highlighted stocks such as HealthEquity, Inc. (NASDAQ:HQY). HealthEquity, Inc. (NASDAQ:HQY) provides financial technology solutions for healthcare and spending decisions. The one-month return of HealthEquity, Inc. (NASDAQ:HQY) was 8.45%, and its shares gained 16.86% of their value over the last 52 weeks. On May 9, 2025, HealthEquity, Inc. (NASDAQ:HQY) stock closed at $90.40 per share with a market capitalization of $7.819 billion.

Baron Health Care Fund stated the following regarding HealthEquity, Inc. (NASDAQ:HQY) in its Q1 2025 investor letter:

"Health Savings Account administrator HealthEquity, Inc. (NASDAQ:HQY) was largely responsible for the stock-specific shortfall in managed health care. The stock fell after the company reported its fiscal fourth quarter earnings. While revenue beat Street estimates, EBITDA and earnings fell short and management lowered guidance due to increased expenses related to fraud activity. Sophisticated criminals broke into customer accounts and stole funds. HealthEquity reimbursed the customer accounts fully and also had extra expenses associated with customer calls related to the fraud and recovery. Management is taking steps to address the issue, including enhanced security measures for its clients, and is pursuing recovery from insurance providers. Outside of this setback, the rest of the business is performing well. HealthEquity is gaining market share and benefiting from higher interest rates on deposits. We also see upside optionality from potential legislation expanding eligibility for health savings accounts."

An online investment platform, showing stocks, index funds, and a mutual fund investment platform.

HealthEquity, Inc. (NASDAQ:HQY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held HealthEquity, Inc. (NASDAQ:HQY) at the end of the fourth quarter compared to 23 in the third quarter. In the fourth quarter of fiscal 2025, HealthEquity, Inc.’s (NASDAQ:HQY) delivered strong year-over-year revenue growth, with revenue increasing 19%. While we acknowledge the potential of HealthEquity, Inc. (NASDAQ:HQY) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.