Why Allscripts Healthcare Solutions Shares Imploded

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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: Shareholders of health-care information technology provider Allscripts Healthcare Solutions (Nasdaq: MDRX  ) may need medication for an upset stomach after their stock plunged as much as 44% earlier in the trading session following a dismal first-quarter earnings report.

So what: For the quarter, Allscripts reported a 9% rise in revenue to $365.5 million and a profit of $0.12 excluding one-time costs. These results missed Wall Street's estimates for a profit of $0.24 and $387.7 million by a mile. A 9% drop in booking revenue and a 64% leap in development costs were highlighted as the primary reasons for the weakness. I wish that were the end of it.

Allscripts also announced that three members of its board of directors, its long-serving CFO, and its board chairman were leaving the company. Add in at least two downgrades from Citigroup and UBS and you have the makings of a terrible day.

Now what: I'd like to tell you that today's huge move lower created a significant buying opportunity in the stock, but I can't help but be concerned by Allscripts' weakening sales trends, rising development costs, and especially the shake-up on the board. I'd consider breaking out the yellow caution tape until further investigation has been done around today's shareholder fleecing.

Craving more input? Start by adding Allscripts Healthcare Solutions to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

Read/Post Comments (2) | Recommend This Article (5)

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  • Report this Comment On April 27, 2012, at 2:07 PM, HDTVBG wrote:

    Even dead cats bounce. December 2012 deep in the money calls on this one for a quick double!

  • Report this Comment On April 28, 2012, at 8:35 AM, funpilot wrote:

    If Allscripts were ever able to attract these 5 relatively unknown superstars in healthcare, their turn around would be assured: Mark Goldberg, Sam Rubenstein, Jim Whicker, Robert Barbour, and Lisa Miller.

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