Market Overview

Healthcare IT Investors: Oppenheimer Just Made Some Waves

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In a report issued Wednesday, Oppenheimer analysts Mohan Naidu and Mike Ott initiated coverage on the healthcare IT sector, which has been benefited by the government’s push toward an increased adoption of technology in healthcare.

For years now, investing in this arena has been focused on electronic medical record (EMR) vendors, mainly motivated by the government’s “carrot and stick approach to pushing adoption” of EMR technologies among physicians and hospitals.

Opportunities in this segment still exist, as some of the vendors count with the capabilities to win considerable replacements and upsell growth. Cerner Corporation (NASDAQ: CERN) (Outperform rated, $89 price target) and athenahealth, Inc (NASDAQ: ATHN) (Outperform rated, $174 price target) fall into this category due to strong track records and a platform vision.

Nonetheless, the analysts say, hospitals and physicians are starting to reallocate their resources “toward solutions that address the new changes in healthcare, especially around alternate reimbursement models, and productivity and workflow improving solutions that hospitals ignored or postponed due to their focus on EMR deployments.”

The firm believes the current push of CMSs toward risk-based reimbursement models should attract greater spending on population health platforms. In this industry, the analysts see Cerner, The Advisory Board Company (NASDAQ: ABCO) (Outperform rated, $65 price target) and Premier Inc (NASDAQ: PINC) (Outperform rated, $42 price target) starting to gain momentum. Meanwhile, Imprivata Inc (NYSE: IMPR) (Outperform, $20 price target), Omnicell, Inc. (NASDAQ: OMCL) (Outperform, $44 price target) and Vocera Communications Inc (NYSE: VCRA) (Outperform, $15 price target) seem to be gaining traction in the niche product category.

Finally, the experts believe that growth in specialty drug spending within the pharmacy benefit management (PBM) market, “will favor the large PBMs and could lead to industry consolidation.” In this line CVS Health Corp (NYSE: CVS)’s (Outperform, $119 price target) retail and PBM model offers one-of-a-kind opportunities. Moreover, the company’s “shift toward a health-focused company opens new growth avenues.”

Latest Ratings for CERN

DateFirmActionFromTo
May 2020Morgan StanleyMaintainsUnderweight
May 2020SunTrust Robinson HumphreyDowngradesBuyHold
Apr 2020BarclaysMaintainsEqual-Weight

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