Unlock: Athenahealth (ATHN) When Attrition Rate Increases Things Get Bad
It pays to do fundamental research. This bearish note on ATHN was presented to clients yesterday ahead of earnings. Major breakdown today first time in 4 years. To learn more about our approach and how you can become a successful trader, sign up for 2 week trial and test drive live chat room with some of the best traders: SUBSCRIBE
Athenahealth (ATHN) – Speculative trade but what are chances this will crash after hours tonight? Chart looks vulnerable though it has been able to hold this level for a long time. Seeing some bears making bets on stock crashing and this isn’t first time either (see previous bearish activities recorded in Tracker). Today:
– Buyer of 500 Jan’17 110-strike puts for $5.70 offer
Separately a bearish risk reversal:
– 500 November 150 calls sold to open for $0.70 credit
– 500 November 110/95 put spread bought for $2.65 debit
Last week on October 13, KLAS conducted a conference call in which they discussed outlook of EMR vendors including Cerner, Athenaheatlh and few others. KLAS mentioned a few points that jump out:
1) ATHN got a score of 7.8 for revenue cycle services for groups with over 10 physicians. That’s down from 8.2 in Q2.
2) KLAS mentioned about 14% of practices are planning to replace ATHN, which is significant. There were 23 small wins announced but collectively that doesn’t move the needle (only by up to $25M) if KLAS is right that many practitioners are looking to switch.
3) Athenahealth used to maintain second position after Cerner but now appears to have fallen to 3rd spot in vendor choice after Epic took over.
4) KLAS indicated that 15% of ATHN customers are thinking of leaving or replacing Athena vs. 85% sticking with them. That 15% seems very high and could be big red flag. Note KLAS portrayed 85% retention rate as being good to sort of suggest 15% attrition is not a big deal.
In light of this, note consensus has gradually over the year increased its FY2017 EPS estimate from $2.00 to $2.23. That would create a disconnect in story if KLAS is even half right about deterioration in business.
