On May 15, 2013, we reiterated our recommendation for Allscripts Healthcare Solutions, Inc. (MDRX - Analyst Report) at Neutral based on the company’s first quarter results.
Allscripts announced results for the reported quarter on May 9. While revenues and earnings missed the Zacks Consensus Estimates, bookings roughly stabilized on a sequential quarterly basis.
Allscripts should benefit from its position in the healthcare information technology space. It is believed that the small- and mid-sized ambulatory care market is well penetrated by Electronic Health Record (EHR). Allscripts has positioned itself by working in tandem with health systems that are providing EHR to their associate physicians. The company is seeing opportunities as doctors recognize that cheap products will not meet their requirements.
Allscripts has engaged in synergistic tuck-in acquisitions. In the first quarter 2013, Allscripts acquired dbMotion and Follow My Health (formerly Jardogs). dbMotion is a competitive differentiator as it is a robust population health management vehicle. dbMotion also functions as a health information exchange center and analytics tool. Follow My Health has patient portal expertise. It is a part of the company’s community health effort and will serve as a stage for consumer interaction.
Allscripts has market share in both inpatient and ambulatory settings. Since incumbency is deemed to be the most significant competitive advantage, we believe the company will be a good performer in the long run.
Larger players, such as Allscripts and Cerner Corporation (CERN - Analyst Report), are expected to have an advantage over smaller competitors. However, the market is price sensitive particularly on the lower end. Further, some competitors such as Cerner, have long ago developed unified and seamless products serving both inpatient and outpatient segments. Athenahealth, Inc. (ATHN - Analyst Report) is another competitor in a crowded field.
We currently have a Zacks Rank #4 (Sell) on the company. However, we are more positive about other medical information systems stocks such as Merge Healthcare Incorporated which carries a Zacks Rank #2 (Buy) and is expected to do well.