Athenahealth Q3 Just A Little Worse Than Expected, Things Could Get Better From Here

Baird Equity Research maintains an Outperform rating for athenahealth, Inc ATHN after the company reported earnings Thursday after the market close. Analyst Michael Gillmor thinks the third-quarter report was just slightly worse than feared, but the risk-reward is still favorable.

The company reported lower than expected revenue due to low utilization and hurricanes. Bookings were soft on weak buying activity, and athenahealth decided to lower its revenue guidance.

There were also some positives: The company is implementing cost reductions faster than expected. The company expects to generate $100 to $115 million of cost savings in 2018. Its cost savings include rationalizing marketing spend, office closures, and a new organizational structure.

Gillmor explained that the stock has some technical support around current price level (see Gillmor's track record here). Even with the assumption of slower growth in 2018, the analyst believes the risk-reward is attractive around 11 to 14 times implied EBITDA potential. Athenahealth reduced revenue guidance to $1.2 to $1.22 billion from a range of $1.21 million to $1.25. Gilmore thinks the revenue growth in 2018 should be at least 10 percent higher.

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