December 6, 2012
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 cloud-based revenue cycle management company athenahealth (NASDAQ: ATHN ) rallied as much as 11%, following its analyst day, where it divvied out its full-year forecasts for 2012 and 2013.
So what: Athenahealth, which supplies software to medical practitioners, lowered its full-year revenue guidance by $5 million to a range of $420 million-$425 million, but noted that EPS would come in at the high-end of its previous forecast, $0.95-$1. For 2013, athenahealth anticipates sales will grow by about 25%-30% to a range of $525 million-$550 million (more or less in-line with Wall Street's estimates), and will produce a profit of $1.15-$1.25 per share, a bit shy of the $1.28 that analysts were expecting.
Now what: I agree that the digitization of all content in the medical sector, due to the Affordable Care Act, is a good thing for medically-oriented software companies, but athenahealth's valuation is as frothy as they come. Valued at 60 times forward earnings (using the midpoint of the company's estimates), athenahealth would need to report blowout earnings nearly every quarter in order to justify its valuation. Based on yesterday's analyst day, I'd hardly say it's done that, and I remain decidedly negative on its near-term outlook.
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