Needham & Company upgraded HealthStream (NASDAQ: HSTM) from Hold to Buy with a price target of $26.00.

Analyst Scott Berg commented, "HealthStream reported strong 4Q revenues, but weaker than expected operation margins drove an in-line EPS quarter as the EPS outperformance was entirely tax-related. However, quarterly business metrics were above expectations, which drove FY16 guidance significantly stronger than expected, even in the face of higher FY16 ICD-10 revenue contraction than we previously modeled, which we believe reflects the strong 4Q seat adds and better sales pipeline activity entering 2016. We upgrade to Buy from Hold as we believe the current valuation of 2.2x EV/FY16E revenues is highly attractive relative to revenue and EPS growth rates that should trough in FY16 and accelerate into FY17 as HSTM takes the majority of the ICD-10 revenue impact in FY17."

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Shares of HealthStream closed at $20.07 yesterday.