UPDATE: Cowen Downgrades Cerner (CERN) and Allscripts (MDRX) to Market Perform
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(Updated - September 8, 2016 7:55 AM EDT)
Cowen downgraded Cerner (NASDAQ: CERN) and Allscripts (NASDAQ: MDRX) from Outperform to Market Perform with price targets of $65 (unchanged) and $14 (prior $17). Analyst Charles Rhyee thinks valuation fairly reflects moderating long-term growth expectations.
"While recent fundamentals have cleared a low bar, we don't think new rev oppties are likely to expand fast enough to accelerate growth over a maturing base and reflate multiples," said Rhyee.
"For CERN, we believe the growth issue is largely a function of the law of large numbers as CERN approaches $5B in annual revenue in 2016. While we still view CERN as a high-quality company and the HCIT public market leader, the issue has become what multiple to pay for a business we believe is starting to enter a more mature stage," continued the analyst.
Discussing Allscripts, the analyst said, " MDRX faces many of the macro headwinds to growth faced by CERN, albeit at a smaller scale. While this should make growth more attainable, MDRX has struggled to return to meaningful top-line growth and it is hard to see a significant catalyst that would change this. MDRX is only expected to post organic rev growth of 4% in 2016, with mgmt targeting 5-7% growth L-T, which we think makes it harder to leverage earnings growth over its fixed cost base. MDRX’s reliance on services amidst a continued decline in system sales also continues to cap top-line growth."
Shares of Cerner closed at $65.00 yesterday.
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