$ATHN 2018-08-05 : Transcripts- ATHN Edited Transcript of ATHN earnings conference call

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Q2 2018 athenahealth Inc Earnings Call

WATERTOWN Aug 6, 2018 (Thomson StreetEvents) — Edited Transcript of athenahealth Inc earnings conference call or presentation Monday, July 30, 2018 at 9:00:00pm GMT

TEXT version of Transcript

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EARNING UPDATE $ATHN athenahealth, Inc. for quarter ending q_Jun18 – Revenue fell but Margins expanded

[s2If !current_user_can(access_s2member_level0)]Please login to read the earning update on ATHN [lwa][/s2If][s2If current_user_can(access_s2member_level0)]athenahealth, Inc. reported earnings (EPS) of 0.89 per share for the quarter ending q_Jun18. This is vis-vis 0.76 per share for the previous quarter ending q_Mar18, a growth of 17.1 %. Compared to last year same quarter (q_Jun17), earnings grew…

$ATHN 2018-08-04 : Transcripts- Edited Transcript of ATHN earnings conference call

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Q2 2018 athenahealth Inc Earnings Call

WATERTOWN Aug 5, 2018 (Thomson StreetEvents) — Edited Transcript of athenahealth Inc earnings conference call or presentation Monday, July 30, 2018 at 9:00:00pm GMT

TEXT version of Transcript

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Yes I know that Jeb has dropped out of the race for the Republican nomination for President.  It is Jonathan Bush that I am talking about.  Jonathan is Jeb's cousin and CEO of Athenahealth ($ATHN).  Athenahealth offers cloud-based services for healthcare and point of care mobile apps.  And it is headquartered in Watertown Massachusetts (where my wife lived when I first met her).

The stock is what is most interesting to me.  After basing in what turned out to be a topping consolidation from November to January, it fell to a low of 114 in February.  Since then it has been making higher lows against resistance at 140, creating an ascending triangle.  A break of this triangle would target a move to 165.  Right back in the center of that prior consolidation.

Momentum is picking up for the stock.  The RSI is toying with a move into the bullish zone over 60, while the MACD is crossed up, positive and rising.  Both support a move over the trigger.  What has been the sticking point so far for this stock has been an inability to move over its 200 day SMA.  That is where it is stalling on the past 3 day consolidation.  Two things to look for: A move over 140 and a move over the 200 day SMA and then maybe Athenahealth stock will head to the clouds as well.

...(snapping the DJIA 5-day win streak), but still posted a strong week of gains, led by a 7% increase in oil prices (lifting stocks), improved economic data (jobs today), and investors once again taking advantage of the “dip” in markets after a mixed earnings quarter. Equities jumped early following a positive monthly jobs report, which showed both job and wage growth, while more people returned to the work force (but reversed lower).

The stronger figures means a June Fed rate hike should now be firmly on the table, even despite a low inflation environment. With the jump in expectations, the dollar rallied, while bonds and gold sold off. Despite the pullback today, markets still posted strong gains for the week. The Russell 2000 Index rose 3.3% this week, and the S&P 500 posted a 2.8% gain.

Thorns in the Market...

Roses for Today...

And the All Time New Highs...

athenahealth Inc. (ATHN) is set to report FQ1 2014 earnings after the market closes on Thursday, April 17th. athenahealth provides electronic medical charts and other physician services. Since 2011 athenahealth has been a red hot stock, but in late February the stock began to pull back sharply as future growth projections have curbed and high multiple stocks have been abandoned for more value oriented equities. The company is still continuing to grow at an impressive rate, but may not be able to keep up with the insane projections that have been established. Over the past 3 quarters athenahealth has posted a minimum of 43% year over year revenue growth and this quarter Wall Street expects yoy growth to come in at a slightly lower 35%. Here’s what investors expect from athenahealth on Thursday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.

(Click Here to see Estimates and Interactive Features for athenahealth)

The current Wall Street consensus expectation is for athenahealth to report 17c EPS and $169.57M revenue while the current Estimize.com consensus from 11 Buy Side and Independent contributing analysts is 20c EPS and $171.85M in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting athenahealth to beat the Wall Street consensus on both EPS and revenue by a small margin.

Over the past 6 quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting athenahealth’s EPS and revenue 3 times and twice respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a larger difference between the two groups’ expectations compared to previous quarters.

The distribution of estimates published by analysts on the Estimize.com platform range from 18c to 24c EPS and from $169.63M to $179.40M in revenues. This quarter we’re seeing a moderate distribution of estimates on ATHN.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean more volatility post earnings.

Over the past 4 months the Wall Street EPS consensus has come down from 21c to 17c while the Estimize consensus slipped from 22c to 20c. Meanwhile Wall Street revenue consensus remained relatively flat while the Estimize community brought down its estimate from $173.77M to 171.85M. Timeliness is correlated with accuracy and downward estimate revisions at the end of the quarter are often a bearish indicator.

The analyst with the highest estimate confidence rating this quarter is turbinecity who projects 18c EPS and $170.23M in revenue. turbinecity was our Winter 2014 season winner and is ranked 6th overall among over 4,100 contributing analysts. Over the past 2 years turbinecity has been more accurate than Wall Street in forecasting EPS and revenue 59% and 55% of the time respectively 1644 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case turbinecity is expecting athenahealth beat the Street’s expectations but miss the Estimize community’s consensus on both EPS and revenue.

athenahealth has been a hot stock over the past 3 years but over the past 2 months the stock has sank by over 25%. Fears of slowing growth and a general bloodletting of high multiple stocks have brought share prices back down to earth. But on the bright side the electronic charts provider has seen big gaps up over the past 2 earnings reports. On Thursday we will see just how fast athenahealth can continue to grow.

Throughout my investment career I've found that one of the most useless exercises is speculating on the "why" when asset prices move. That practice is, for the lack of a better phrase, mental masturbation. No you don't step into a trade without a thesis, whether that be fundamental, technical, or quantitative, but attempting to manage positions by understanding the "why" for every hem and haw of the market is a fool's game. 

Paying attention to price action within the trend is the most important aspect of risk management and thus generating quality absolute returns over long periods of time. 

I've focused most of my career on high growth, high momentum names. Save for deep value strategies, which are only successfully executed by a tiny group of money managers, high growth and momentum is where the vast majority of opportunity in the market lies for discretionary equity traders. 

There are two times within the trend when these types of names should be bought. When a stock leads the broader market to new highs off of a wide base of support, and when momentum names as a whole have been unanimously thrown out the door for a few weeks and trade at very low RSI levels. 

We are currently seeing an excellent example of the latter, and it predicates buying these names hand over fist on Monday in advance of significant mean reversion to the trend. Think of it as the rubber band snapping back after being stretched too far. 

Below is a chart showing just how incredibly fast and merciless the shellacking of these names has been over the past few weeks. It has been vomit inducing for many long/short growth fund managers. According to Goldman Sachs equity research:

"The past 5 trading days [for GSTHHVIP, a proxy for hedge fund positions] rank in the lowest 2% of returns since May 2001"

The relevant chart is at the top left, and it's a doozy. 

A perfect individual example of what's taken place here, and the opportunity that it currently presents is seen in Athenahealth (ATHN). 

While ATHN was significantly overbought in early March according to the RSI reading at the bottom, the resulting selloff has been non stop and leaves the stock well oversold.

The following two charts (click through for interactive charts) from Estimize paint the picture of the massive momentum in revenue growth that the company is experiencing and why it fits into the bucket of a typical momentum name held by many hedge funds today.

 As I said, speculating as to why these names have been hammered so hard is a useless exercise. If we begin to see revenue growth estimates across the board in these names start to come down significantly over the next few weeks we'll have a better idea, which could signal tough going in the intermediate term.