Stephens Inc. Research Bulletin
November 15, 2000
HEALTHAXIS INC. FYDec. Rev (mil.) Prior Est.
HAXS - $3.69
Rating: NEUTRAL 99A $43.0
Price Target (12 mo.): $4 00E NE N.C.
Nik Fisken, CFA, (501) 377-6335 01E NE N.C.
Barry McCarver, Associate, (501) 377-8131
* no estimates
3Q00 Results; Lowering Rating to NEUTRAL Due to HealthAxis' Transitional State
Summary. HealthAxis is in the midst of several transitions that we believe will translate into volatility
for its common until they are resolved. More specifically, we expect HAXS to trade in the $2-$5 range
depending on what transitional issues are resolved and when. As a result, we are lowering our rating to
NEUTRAL from BUY with a new 12-month price target of $4 (previously $15), or roughly 4x LTM
revenue plus cash per share. However, over the course of the next year, we believe there will be a
compelling opportunity to buy an emerging e-Health software company at an attractive valuation. We
don't expect this to occur until mid-1Q01, when we believe the transitional issues will be resolved. The
key factors affecting the Company are as follows-
The merger between HealthAxis Inc. and HealthAxis.com.
The possibility of being delisted by NASDAQ.
The lack of financial guidance to the Street and a search for a new chief financial officer.
In the midst of the aforementioned factors, HAXS has made several positive announcements surrounding
new contracts with new and existing clients and has hired a new head of sales from one of the industry
leaders, Computer Sciences Corporation (CSC - $72.94). Nonetheless, we see little upside for HAXS
until the three issues listed above are resolved.
Update on the Merger. HAXS has been diligently working to finalize the merger between HealthAxis
Inc. and Healthaxis.com. The Company plans to file the updated S-4 registration with the SEC this week
and hopes to get approval by the first of December. At that time the Company will solicit proxies and
hold a shareholder meeting to vote on the merger in January 2001.
Possible Delisting of HAXS. Due to the drop in price for HAXS stock, the Company currently does not
meet the requirements to remain listed on the NASDAQ. In order to meet these requirements HAXS
must have a stock price of at least $5 or tangible net worth of at least $4 million. The Company has
appealed the delisting and is scheduled for a NASDAQ hearing on December 8. The Company's appeal
will be for a stay of delisting until the merger takes place at which time the Company's tangible net
worth should meet the listing requirements.
The CFO Search Continues. HAXS has been searching for a CFO for some time. The lack of CFO
coupled with a newly hired sales executive has deterred the Company from providing financial guidance.
However, management stated on its 3Q00 conference call that it is interviewing many qualified
candidates and hopes to a have a CFO by the end of January. |
