Cerner (CERN) PT Raised to $81 at Stifel as Signs of Growth are Emerging

Stifel analyst David M. Grossman raised the price target on Cerner (NASDAQ: CERN) to $81.00 (from $75.00) noting that green shoots are coming up but the headwinds from the legacy core business will create a drag in the near term. CERN reported in-line revenue (down 3%) and EPS ($0.78, +4%). Excluding the impact of divestitures, revenue was up 1%, an improvement versus a decline of 1% in 3Q. Margins (+120bp y/y) were in line with consensus as well, and bookings were slightly above the midpoint of the guided range.

The analyst reiterated a Hold rating, stating "While there are exciting growth opportunities like HealtheIntent and Health Networks, the legacy core ex-Federal continues to decline. We estimate 4Q revenue was up 1%, ex-divestitures, better than the 1% reduction last quarter, but still declining y/y excluding the VA/DoD contract ramps. Management guided to 6% (midpoint) revenue growth in 2021, ex divestitures, or ~3% growth excluding Federal, which feels a tad ambitious despite easing compares. We feel more confident in the margin guide of +100bps y/y, which, combined with share repurchases, may provide some cushion on weaker revenue. We continue to look for signs of re-accelerating revenue growth outside of Federal (~20% of revenue) to get more constructive."

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