Allscripts-Misys Healthcare Solutions
from sell to hold, after a post-earnings dip on Monday brought the health care information technology provider back to a fairer valuation level.
Allscripts was back up to $19.66 after a 3.5% rise on Tuesday morning, or a gain of 68 cents.
Allscripts-Misys reported a bookings level for its second quarter on Monday that was up 16%, but fell short of the $100 million level or above at which many analysts had been expecting the health-care IT company to generate bookings.
Allscripts-Misys led a retreat yesterday among the health care IT stocks as a result of the bookings disappointment. Joining Allscripts-Misys in Monday's decline was
However, some analysts believed the post-earnings drop actually presented investors with an opportunity to get back into Allscripts stock. All the big health care IT players rallied to such an extent in 2009 that many viewed the stocks as already being at full valuation, short of a share decline the likes of which occurred on Monday.
What's more, many investors and analysts said these health care IT companies would not be attractive again until they proved that the move by hospitals and physician groups to adopt electronic records would really be coming as quickly and as widely as thought.
It's being seen by some as "put up or shut up" for the health care IT players, after a period of too much talk about the potential sales to be generated by the move to electronic records. Allscripts didn't satisfy that challenge judging by the market's Monday reaction.
Even though Cerner, for example, operates in the large hospital market -- and is immune from problems faced by Athenahealth and Allscripts in physician market sales -- at over $88 a share, Cerner is not nearly as attractive as it once was when it traded at $75, as recently as September.
Allscripts' bookings disappointment fueled fears that the move to electronic records could still hold some surprises for investors that already bid these healthcare IT stocks up.
There are broader indications from investors that the
2009 rally in health care names like Cerner has turned the attention to health care underdogs and turnaround stories for 2010 growth opportunities.
The new Deutsche Bank research somewhat dovetails with comments made yesterday by analysts at Maxim Group and Caris & Company
that Allscripts-Misys shares had become more attractive as a result of the selloff on Monday.
Deutsche analysts Michael Cherny and Ross Muken wrote in the note that Allscripts was being upgraded from sell to hold, and the price target was being increased to $17.50, because the pullback following the earnings "puts the stock at a level we view as fairly balanced from a risk/reward profile."
Deutsche estimates that using discounted cash flow analysis the implied value per Allscripts' share is between $15.71 and $19.43, with $17.50 representing the midpoint of the range.
The Deutsche analysts believe the longer-term opportunity for Allscripts-Misys still exists, but they remain neutral on the outlook: "The stock performed incredibly well in 2009 due to excitement over the stimulus, despite lackluster results throughout the year, and we think the company is well-positioned to capture a significant share of new bookings
related to health care reform but we view EPS upside as limited due to the need to increase spending."
The Maxim and Caris analysts remain more bullish on the stock, with buy ratings. Allscripts-Misys spokesman Todd Stein also wrote in an email that the company believes investors should look at the year-to-date booking growth of 30%, as opposed to the 16% year over year growth that disappointed on Monday.
Regardless of the year-over-year or year-to-date bookings numbers, investors were looking at Allscripts shares again on Tuesday morning. Allscripts' shares had already surpassed their average daily volume of one million shares traded by mid-day Tuesday.
While Allscripts was bouncing back on Tuesday, the other health care IT stocks were not. Cerner and Quality Systems were both down, albeit less than 1%. Athenahealth was still suffering the most, down 2.7% on Tuesday morning, bringing its two-day share decline to approximately $2.60.
-- Reported by Eric Rosenbaum in New York.
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