The price of Athenahealth Inc. shares has slumped since September over concerns about slowing growth, but the medical billing and records software maker is still capable of achieving strong longer-term growth, according to a Raymond James analyst who raised his rating on the stock.
Shares of the Watertown, Mass., company climbed in Monday afternoon trading, outpacing a broader market rally.
THE BIG PICTURE: Athenahealth's stock started slipping in late September and then sank after the company reported third-quarter results that missed some analyst expectations.
The company said in October its third-quarter earnings climbed 18 percent to $6.2 million, or 17 cents per share. Revenue jumped 26 percent to $105.8 million, but that fell short of Wall Street expectations.
Analysts also said the company's earnings missed Wall Street forecasts when they were adjusted for a benefit tied to the company's acquisition of Proxsys LLC, which provides cloud-based care coordination services between doctors and hospitals.
Athenahealth shares had fallen 34 percent by to $60.72 by Friday after closing at $91.77 on Sept. 28.
THE ANALYSIS: Analyst Alexander Y. Draper raised his rating on the stock to "Strong Buy" from "Market Perform."
He said investors are worried mainly about the company's weak third-quarter bookings, pricing pressure and a potential partnership loss. The analyst said slightly lower growth expectations are already priced in to the shares, and he sees a compelling buying opportunity.
Draper said Athenahealth can still grow its revenue between 25 percent and 30 percent next year and in 2014, and the company is still gaining market share from struggling competitors.
SHARE ACTION: Up 6 percent, or $3.67, to $64.39 in Monday afternoon trading, while the Nasdaq exchange climbed 1.7 percent.