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Canaccord Genuity upgrades Castlight Health as churn rate could decline

Canaccord Genuity analyst Richard Close upgraded Castlight Health Inc. to "buy" from "hold," noting that current valuation does not fully reflect the diminishing negative impact from churn and the faster growth in annual recurring revenue.

The analyst expects the churn rate to decline in the near future as the company, which recently acquired Jiff, broadens its service platform. Close also said the partnership with Anthem Inc., which resulted in roughly 40% sequential annual recurring revenue growth for the company, will continue to grow.

He noted there were "signs of progress" in the company's partnership with SAP Technologies Inc., which invested $18 million in the company. Further, he said many research reports that indicate growth in corporate health and wellness programs in recent years validate the company's business model.

Close raised his price target to $7 from $5. He changed his non-GAAP EPS estimates to a loss of 25 cents from a loss of 27 cents for 2017, to a loss of 11 cents from a loss of 7 cents for 2018 and to a loss of 5 cents from a loss of 4 cents for 2019.