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 (ATHN) have dropped as much as 10% today, after missing estimates in its latest earnings report. The highly valued health-care services company also offered weak revenue guidance for the entire year.
So what: Revenue, at $105.9 million, and adjusted net income, at $11.2 million (or $0.30 in adjusted EPS), were both solid year-over-year improvements, but analysts had expected more. Revenue forecasts had averaged $109.2 million, and EPS was projected at $0.26. The reason for Athenahealth's earnings beat was due to one-time acquisition costs, without which the company would not have surpassed expectations. Athenahealth also posted a significant underperformance in bookings, which executives claimed was about two-thirds of what they'd expected. Fourth-quarter rebound optimism, due to booking delays in the third quarter, didn't do much to reassure the market.
Now what: Jeffries Group analysts downgraded Athenahealth following their disappointing earnings to an underperform rating, and analysts from both Avondale Partners and First Analysis lowered their rating to the equivalent of "hold." Athenahealth's triple-digit P/E can't hold up forever, and this sign of weakness may be all the market needs to bring shares down to a less eye-popping valuation, a process that's almost certain to include further share-price declines.
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