Auriga Upgrades athenahealth (ATHN) to Hold; Raises FY10-11 Estimates
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Auriga upgrades athenahealth (Nasdaq: ATHN) from Sell to Hold. Price target $36.
Auriga analyst says, "We are taking a more neutral tone on Athenahealth (ATHN) and upgrading the shares to Hold from Sell. Our rating change follows a good quarter that reflected strong growth in provider additions and collections. In particular, the adjusted gross margin was 100bps better than our estimate and up 200bps YoY. Although Q3 EPS of $0.14 was $0.02 short of consensus, one penny of the miss was due to a higher tax liability and the other $0.01 was driven by higher infrastructure investment to support the company’s growth. Revenue of $49M met consensus and was $1M ahead of our estimate. Although our view that an adverse payer mix shift will weigh on collections remains intact, it is a longer-term thesis, and while the company indicated it is feeling a very slight impact, it is not affecting short-term results. Management reiterated its confidence in meeting its FY11 goals, and the gross margin is practically there already. As such, we think downside is limited in the near to intermediate term.
"Given an improving gross margin forecast (driven largely by automation and less manual intervention, reducing variable cost), we are upping our EPS estimates by $0.03 in each of FY10 and FY11, to $0.89 and $1.25, from $0.86 and $1.22, respectively. There is no material change to our revenue forecast."
To see more analyst ratings on ATHN Click Here.
athenahealth, Inc. engages in the provision of Internet-based business services for physician practices in the United States.
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