Athenahealth is a company that has said it is a cloud-based play, but many investors feel it is just a medical records play. Cramer says medical records is not a very fast-growing business and is a very competitive business. He used to like the stock but he has been very suspicious of cloud companies since the first week of March.
Cramer has also not liked Twitter and has said it would fall to $29 a share because it trades on metrics such as monthly average users and numbers of tweets, but he likes earnings per share as a metric.
"We rate ATHENAHEALTH INC (ATHN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 29.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, ATHN's share price has jumped by 30.73%, exceeding the performance of the broader market during that same time frame. Although ATHN had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- The gross profit margin for ATHENAHEALTH INC is rather high; currently it is at 58.16%. Regardless of ATHN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ATHN's net profit margin of -4.94% significantly underperformed when compared to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Technology industry. The net income has significantly decreased by 1250.7% when compared to the same quarter one year ago, falling from $0.70 million to -$8.06 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Health Care Technology industry and the overall market on the basis of return on equity, ATHENAHEALTH INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: ATHN Ratings Report