As President Obama continues to discuss automated healthcare records, we share commentary from Elizabeth Harrow on one stock poised to benefit, athenahealth (NSDAQ: ATHN).
Here, the advisor with Schaeffer's Investment Research looks at this Internet-based services provider for physician practices as her latest "undiscovered gem."
"The company's flagship product is a software product called athenaCollector, which automates and manages billing-related functions and includes a medical practice management platform.
Founded in 1997, and with a market capitalization of $1.24 billion, ATHN definitely qualifies as a small-cap company. However, there are plenty of reasons why investors can expect big things from this modestly sized stock.
"The shares of ATHN are easily outperforming the broader equities market, having racked up a gain of 16.5% during the past 52 weeks. In fact, the stock has consistently bested the S&P 500 Index on a relative-strength basis since April 2008.
"More recently, ATHN has toppled short-term resistance from the 36 level, thanks in part to a technical boost from its rising 10-week and 20-week moving averages.
"The next potential obstacle for the shares lies well overhead in the round-number 40 region, which is the site of the stock's annual high.
"While this looming resistance could provide a challenge for the stock during the short term, ATHN could potentially benefit as more and more Wall Street players are drawn to its bullish bandwagon.
"For example, Zacks reports that 6 of the 11 analysts currently following the stock consider it worthy of just a lukewarm "hold" rating. Any upgrades from this skeptical bunch could draw new buying pressure to the shares.
"Additionally, the equity could be overdue for some price-target increases. Thomson Financial calculates ATHN's average 12-month price target as $36.88. Any upward revisions to this consensus estimate could also provide a boost.
"Elsewhere, option traders have grown more pessimistic as the stock has climbed. Short sellers have also accumulated a sizable pessimistic position.
"Short interest accounts for 13.3% of the equity's available float, or 7.8 times its average daily trading volume. If these skeptics are spooked into buying back their bearish bets, it could help ATHN extend its recent uptrend.
"While the stock may endure a short-term rejection at 40, the contrarian backdrop suggests that ATHN has plenty of sideline buying power available to push it higher in the coming months.
"As the doubters on Wall Street gradually capitulate to the equity's strength, it should continue to outperform the broader market."
