J.P. Morgan analyst Anne E. Samuel reiterated the Neutral rating on Premier, Inc. PINC on Tuesday, with a price forecast of $19.

The analyst notes that Premier’s stable business is supported by its ownership structure, leading to longer-term contracts typically lasting five to seven years.

Meanwhile, the company’s growth is closely tied to hospital utilization trends, which has historically led to an expected long-term growth rate of mid-single-digit to high-single-digit percentage increases in both revenue and profit, Samuel adds.

In the short term, though, Premier has experienced weaker performance due to factors like the end of COVID-related stockpiling, rising inflation, and budget constraints faced by hospitals.

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The analyst highlights several risks that could lead to PINC shares underperforming compared to others.

These risks include a potential slowdown in growth within the Group Purchasing Organization business, due to a weak macroeconomic environment, reduced hospital utilization, and the increasing trend of hospitals forming their own GPOs, as well as heightened competition in the market, the analyst cautions.

Additionally, Samuel adds that the Performance Services business faces significant competition, particularly from larger companies with more capital.

Meanwhile, if hospital utilization trends improve, growth could accelerate, potentially making the analyst’s current estimates and price target too low, Samuel notes.

Price Action: PINC shares are trading higher by 0.05% to $19.49 at last check Wednesday.

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