Progyny (NASDAQ: PGNY) Stock is a ‘Restart’ Buy that Hits Home

Fertility benefits management company Progyny, Inc. (NASDAQ: PGNY)  fills a void in health insurance coverage that the world’s leading companies embrace to attract and keep top talent. Infertility coverage that is not deemed ‘medically necessary’ is not covered by most health plans. This leaves the financial and emotional costs on individuals to self-insure or pay out of pocket for IVF services. Progyny contracts with employers to provide full-circle fertility benefits to their employees with cutting-edge science and the nation’s largest high-quality network of fertility specialists to deliver superior clinical outcomes and the shortest path to pregnancy. World-class organizations understand that work-life balance is key to cultivating loyalty and tenure especially with top talent in this age of social media and consciousness. As a result, Progyny has grown revenues at a 72% year-over-year (YoY) pace. The COVID-19 pandemic has made many workers come face to face with the fragility of life and stimulate the awareness of starting or growing a family. Fertility preservation services, freezing eggs or sperm, provides a ‘hedge’ that ensures they have that choice now or later. This narrative underscores the upside potential for shares at opportunistic pullback levels.

Q1 2020 Earnings Release

Progyny reported their Q1 2020 earnings on May 12, 2020. The Company reported earnings of $0.04-per share versus consensus analyst estimates of $0.02-per share with adjusted EBITDA at $7.1 million, up 64% YoY. Revenues were $81.02 million versus $71.81 million analyst estimates, up 72% YoY. The Company updated guidance based on the accelerating relaxing of stay-at-home orders throughout the nation as clinics come back online. They anticipate minimum Q2 2020 revenues of at least $45 million and $4.2 million in net loss. However, management feels the business will rebound much quicker than other areas of the economy. Progyny made a statement that they have been “shielded from the worst impacts of the historic levels of unemployment due to composition of our client base, and our 2.1 million members as of March 31^st remain intact as of today.” The largest client companies representing significant portions of revenues have not implemented any meaningful workforce reductions or furloughs. On the contrary, several have their commitment to no workforce reductions and even resumption of hiring in 2020. Some of their clients include Microsoft (NASDAQ: MSFT) , Intel (NASDAQ: INTC) , Facebook (NASDAQ: FB) , Salesforce (NYSE: CRM)and Goldman Sachs (NYSE: GS) .

The Macro Trends Remain Intact

Even during times of pandemic, certain trends remain the same including the desire to have children and start a family. The reality is that rates of infertility are growing in the U.S., lack of adequate coverage, and the need for equality and inclusiveness in the workplace and for employers to maximize their health care dollar benefits. These areas all growth drivers that remain intact. During COVID-19, family building benefits take on more significance accelerating societal trends. This is especially important with the Millennial demographic which is becoming the largest portion of the workforce.

The Restart Back to Full Capacity

National stay-at-home orders kicked in after March 17^th when COVID-19 was declared a pandemic, as many clinics were taken offline or severely cut down on operations. The company saw benefits utilization drop to 15% from the end of March to first half of April. Despite many states including New York declaring fertility an essential service and clinic have authority to perform procedures during the pandemic. The ASRM confirmed on May 11^th, that practices could reopen for all procedures under new safety protocols. They expect to see all network clinics open and operating full service by the end of June. Seasonally, client acquisition and membership growth tends to happen in the third quarter. The sales team is focusing on the stronger industries such as technology, consumer packages goods, pharmaceuticals, software and financial services while minimizing efforts on airlines and hospitality companies. Progyny fertility coverage offers significant savings compared to carrier programs and provides patients with a family building options contract. With operations back to full capacity by end of June, investors may want to consider adding shares at opportunistic entry levels.

Opportunistic Entry Levels

Using the rifle charts on the wider time frames including the weekly and daily to lay out the playing field is suitable for swing traders and investors. The weekly rifle chart has a make or break set-up composed of a rising weekly stochastic mini pup versus a dormant moving average (MA) downtrend. The weekly 5-pd MA support overlaps with the $22.40 Fibonacci (fib) level and 15-pd MA at $23.99. The weekly market structure low (MSL) buy triggered above $22.97, which becomes an important support level on pullbacks. The upside from here appears capped at the $27.60 fib level until the Bollinger Bands (BBs) can expand higher after a pullback. It is worth noting that the BBs are contracting on the daily rifle chart, which indicates a trending move if forthcoming. This presents four opportunistic pullback entry levels at $24.54, $23.62 daily 5-period MA, $22.40 fib and $20.25 overlapping fibs. The earliest pullback levels carry the most risk, so traders should manage the entries with intraday charts. Swing traders can scale for overnight to multi-day holds on converging daily/60-minute stochastic. Longer-term investors may consider a pyramid sizing dollar-cost averaging approach with a covered call strategy to buffer downdrafts on pullbacks to the opportunistic entry levels.