This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Athenahealth Defended After Einhorn Short Call Sinks Stock

Stocks in this article: ATHN

NEW YORK (TheStreet) -- After well-known investor David Einhorn yesterday predicted that the shares of athenahealth (ATHN) could tumble 80% and said he was shorting the stock, several research firms defended the company and its outlook in notes to investors earlier today. Athenahealth provides an Internet-based practice management solution to medical practices.

BULLISH TAKE: Athenahealth is not a software company, but an outsourcing company, and expectations for its operating margins are too high, said Einhorn, the president of hedge fund Greenlight Capital. Moreover, the company will not be able to effectively compete against larger players in the space, Einhorn contended during his presentation at the Ira Sohn investor conference.

ANALYST DEFENSES: One firm contesting Einhorn's thesis in a note to investors earlier today was Citigroup. athenahealth is a software-as-a-service company, since it provides cloud-based products that are largely automated and purchased by its customers for a year at a time, wrote Citi analyst Garen Sarafian. Athenahealth's margins are in-line with its SAAS peers and they should rise as the company's marginal costs decline, while the company has minimal upfront costs, Sarafian said. Additionally, there is room for both athenahealth and competitor Epic to win in the space, added the analyst, who kept a $200 price target and Buy rating on athenahealth. PiperJaffray analyst Sean Wieland was even more upbeat, saying that the stock has reached its best entry point in years. Athenahealth is more than just an outsourcing company and it does not compete head-to-head with Epic, which focuses on the hospital sector, according to the Piper analyst. He reiterated a $220 price target and Overweight rating on the shares.

BEARISH TAKE: Conversely, David Francis, an analyst at RBC Capital, wrote that Einhorn's theories about the challenges facing athenahealth will prove to be largely correct over the longer term. However, the company will have several positive catalysts in the near-term, including strong demand from smaller medical offices for the company's systems, the possibility that the company could announce several deals with larger enterprises, and the disclosure of additional partners for its Enterprise Coordinator inpatient management system, Francis forecast. Although Francis thinks these near-term events "are likely to give bulls a shot in the arm," he kept a Sector Perform rating on the shares due to what he sees as the longer term issues facing the company.

WHAT'S NOTABLE: In slides ahead of its presentation today at Baird's 2014 Growth Stock conference, athenahealth repeated its FY14 adjusted earnings per share outlook of 98c-$1.10 and its revenue view of $725M-$755M.

PRICE ACTION: In early trading, athenahealth sank $15.88, or 12.5%, to $110.90. Reporting by Larry Ramer.

The Fly provides comprehensive coverage of stock news and Street research and delivers it in real-time. The Fly breaks market-moving news and explains sudden stock movements in a rapid-fire, short-form story format. Follow @theflynews on Twitter. For a free trial, click here.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs