Fertility-benefits provider Progyny's stock on track for biggest-ever decline after losing 'significant' client

By Ciara Linnane

Analysts believe the client is Amazon, based on the number of lost members and revenue contribution

Progyny Inc.'s stock tumbled 31% Thursday, to put it on track for its biggest-ever one-day decline, after the provider of fertility-care benefits for employers said a "significant" client had terminated its agreement with the company.

Progyny (PGNY) disclosed the news in a regulatory filing late Thursday without disclosing the name of the client. But it said the client represented about 670,000 members as of June 30 and accounted for 12% of the company's revenue in the first six months of this year and 13% of revenue generated for its fiscal year that ended Dec. 31, 2023.

It also stressed that the client "confirmed that they had no issues of concern over the course of its multi-year relationship with the company, including member satisfaction or quality of service or outcomes."

Truist analysts reckoned that the client referred to is Amazon.com Inc. (AMZN), based on the number of members and revenue contribution.

In the past, Progyny has flagged Amazon as being one of its biggest clients, and in previous disclosures with the Securities and Exchange Commission it has said that in 2019, Google (GOOGL), Amazon and Microsoft Corp. (MSFT) accounted for 16%, 15% and 10% of total revenue, respectively.

"Among these clients, only Amazon has at least 670K lives in the country," analysts led by Jailendra Singh said in a note to clients.

The Truist analysts are expecting Amazon to switch to a new fertility-benefits vendor rather than bringing the business in house. The three leading companies, Kindbody, Maven and Carrot Fertility, are all privately held.

Progyny said it still expects growth in its overall member count in 2025 versus 2024, according to the filing. The contract remains in effect until Jan. 1, so the change won't affect financial results for this year.

Truist is sticking with a buy rating on the stock but lowered its price target to $26 from $33, reflecting a lowering of its price-target multiple to 8x from about 10x previously.

"Based on our catch-up with the company and industry benefit consultants, we believe this is a one-off situation and doesn't necessarily indicate a broader market trend," the analysts wrote.

JPMorgan analysts also said they believe that the client is Amazon, citing the same comment from 2019.

"It is also worth noting that we believe this is likely a competitive loss versus the client exiting fertility benefits, an important distinction when discussing the health of the fertility market (both negative in the near term for [Progyny])," analysts led by Anne E. Samuel wrote in a note.

But they noted the bad news comes after a series of challenging quarters for Progyny and "likely compounds the strained investor perception of some of the unexplained utilization issues."

JPMorgan lowered its stock-price target to $22 from $31.

Progyny's stock is down 55% in the year to date, while the S&P 500 SPX has gained 19.9%.

-Ciara Linnane

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09-19-24 1339ET

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