Einhorn Explains Bold Price Targets For Athenahealth
David Einhorn of Greenlight Capital opened his segment at the Sohn Conference Monday by announcing that his segment would run far over its allotted time and told the audience that “if they’re bored, go home.”
Even more boldly, he gave bull and bear case price targets for Athenahealth (NASDAQ: ATHN) at $50 and $14. He also stated that the bull case requires Athenahealth to control a large portion of the market despite strong competitors. On Bloomberg TV Tuesday he commented, “in a year or two they will run into saturation and their growth with slow down.”
Shares of Athena ended Monday’s trading session (before Einhorn gave his presentation) at $126.78, meaning that Einhorn saw the downside ranging from 60.6 percent to 89 percent, before his comments sparked a 13 percent sell off.
In a recent letter to shareholders the fund manager called out tech stocks like Twitter, Facebook and Netflix claiming that a second tech bubble is here. With no profit, a price/cash flow of 90 and price/book of 12.48, Einhorn puts Athenahealth in that group. He was clear to point out that he does not hope these businesses fail and that many of them are good businesses, their valuations have just become “disconnected.”
To back up his claims of the company being part of a bubble, he cited the falling earnings estimates and consistent misses. EPS has come in below the analyst consensus for five straight quarters and revenue has missed four of the past five quarters.
He called out a Morgan Stanley note on the company which called the stock overweight with a $192 price target. A key problem with the report, he argued is the 30 percent margin which should be closer to ten percent.
One concern Einhorn outlined on Bloomberg TV is that when momentum stock prices shoot to unreasonable levels, it is hard to determine when when they will come back to reality.
Piper Jaffray analyst Sean Wieland disagrees with Einhorn and said that this pull back gives investors the “best entry point ever.” The report iterated that the opportunity is larger than Einhorn indicated and that it is not going head to head with Epic Systems. The overweight rating and $220 price target was reiterated.
At last check the company was down 12.96 percent since Einhorn's comments to $110.50.
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