Shares of athenahealth Inc. (ATHN) declined almost 2% ($2.26) to $119.43 after the company’s reaffirmed 2014 guidance and 2015 initial guidance failed to cheer investors.
For 2014, athenahealth maintained its revenue guidance at $725–$755 million, implying 22%–27% year-over-year growth. The company continues to expect adjusted gross margin close to the mid-point of its guided range of 62.5% to 63.5%. athenahealth also reiterated its 2014 adjusted earnings guidance range at $0.98–$1.10 per share.
The company forecasts 2015 earnings in the range of $1.20–$1.30, up 20.2% year over year at the mid-point. Also, athenahealth expects 2015 revenues in the $900–$925 million band, up 23.3% at the mid-point. The Zacks Consensus Estimate is currently pegged at $924 million, which is higher than the mid-point of management’s guidance.
For 2015, adjusted gross margin is forecasted in the range of 63%–64%, while operating margin is expected in the range of $80–$90 million. Meanwhile, the tax rate is expected to remain at 40% for both the years.
athenahealth aims to expand gross margin in 2015, driven by increasing operational scale. The company expects to continue to invest in sales and marketing to achieve bookings growth of 30%. In line with its growth strategy, athenahealth plans to continue to spend on research & development (R&D) and general & administrative (G&A) activities. However, this will hurt its operating margins in 2015.
Nevertheless, we believe that athenahealth’s 2015 guidance is conservative considering the company’s strong product portfolio, growing physician base and unique business model. Strategic partnerships with the likes of Henry Schein (HSIC), Granite Healthcare Network (GHN) and Ingenious Med is a key growth catalyst for athenahealth.
However, lack of enterprise-sized deals, winding up of government-funded stimulus and intensifying competition from Allscripts Healthcare Solutions (MDRX), Merge Healthcare (MRGE) and others are major concerns in the near term.
Currently, athenahealth has a Zacks Rank #3 (Hold).
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