athenahealth, Inc.’s strong product portfolio, solid network expansion strategies and unique business model buoy optimism. However, the company faces cutthroat competition in the MedTech space.
In the past year, shares of this Zacks Rank #3 (Hold) company have lost 3.2%, outperforming its industry's 18.5% decline. The current level also compares favorably with the S&P 500 index's 7.6% decline.
Here we take a quick look at the primary factors that have been plaguing athenahealth and discuss the prospects that ensure its near-term recovery.
Cutthroat Market Competition
athenahealth’s EHR solution faces stiff competition from the likes of Allscripts Healthcare Solutions and others. MedTech behemoths like Cerner offer long-standing seamless products integrating inpatient and ambulatory-care systems.
Further, SaaS-based models put athenahealth’s pricing under pressure. Stringent hospital budgets also lead to weak pricing, which will continue to hurt athenahealth’s profitability.
Why Should You Hold the Stock?
athenahealth’s portfolio comprises a wide array of products that include electronic health records, revenue cycle management, medical billing, patient engagement, care coordination, population health management and Epocrates.
athenaInsight, an online news hub that reports on U.S. healthcare activities and trends of healthcare providers and ‘de-identified patients’, has also been fortifying the company’s footprint.
Last year, athenahealth rapidly expanded its patient record sharing capabilities with CommonWell and Carequality.
Notably, athenaClinicals is the company’s first economically sustainable, service-based electronic medical records (EMR) system. Among other activities, athenahealth purchased Proxsys, LLC — a care coordination company — and launched athenaCoordinator (now athenaCoordinator Core) for order transmission and care collaboration with secure text message.
These apart, athenahealth recently announced that it has entered into a definitive agreement under which to be acquired by Veritas Capital for approximately $5.7 billion in cash. Under the terms of the deal, athenahealth shareholders will receive $135 in cash per share. After the completion of the acquisition, athenahealth is expected to be combined with Virence Health ("Virence") – the GE Healthcare Value-based Care assets – that Veritas acquired earlier this year. The transaction is expected to close in the first quarter of 2019.
Which Way Are Estimates Headed?
For the fourth quarter of 2019, the Zacks Consensus Estimate for earnings is pegged at $1.14, up 2.7% year over year. The same for revenues is pinned at $358.3 million, mirroring an increase of 8.9% year over year.
For 2019, the Zacks Consensus Estimate for revenues is $1.35 billion. The same for earnings stands at $4.20, up 69.4% year over year.
A few better-ranked stocks in the broader medical space are Veeva Systems Inc (VEEV - Free Report) , Becton, Dickinson and Company (BDX - Free Report) and OPKO Health, Inc (OPK - Free Report) .
Veeva Systems’ long-term earnings growth rate is projected at 19.5%. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Becton, Dickinson’s long-term earnings growth rate is projected at 11.5%. The stock carries a Zacks Rank #2 (Buy).
OPKO Health’s long-term earnings growth rate is projected at 12%. The stock sports a Zacks Rank of 1.
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