Athenahealth Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of athenahealth (Nasdaq: ATHN  ) fell 29% -- near a 52-week low -- on Thursday after spooking investors with poor guidance. The stock closed the day off 15%.

So what: The company, which sells technology for enabling electronic health records, told investors to expect $0.85 to $0.97 a share in 2012 earnings. Analysts were expecting $1.16 a share, according to data compiled by Yahoo! Finance.

Now what: Peers Quality Systems (Nasdaq: QSII  ) and Allscripts Healthcare (Nasdaq: MDRX  ) also fell, but marginally. Investors seem to think these rivals won't face the same sort of margin-bruising investment needs that athenahealth will navigate over the next year. Do you agree? Would you buy shares of athenahealth at current prices? Let us know what you think using the comments box below.

Interested in more information about athenahealth? Add it to your watchlist by clicking here.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

Motley Fool newsletter services have recommended buying shares of athenahealth and Quality Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On December 16, 2011, at 11:25 AM, TMFHelical wrote:

    Revenue projections were actually higher than projected by analysts (that I saw), but earnings projections disappointed. Why? Investors may have noticed that the stock -based compensation expense for athenahealth amounted to 5.6% of the high end revenue projections. This follows 6.1% in FY10 and 4.5% from 2009 (FY11 hasn't reported fully yet).

    Contrast with past levels of stock-based compensation expese as a % of revenues of 1.3% for Cerner (2010), 1.1% for QSII (2010), and 2.1% for Allscripts (FY ended May 2010).

    Margin busting expenses indeed.

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