Shares of HealthStream were up 17 percent Tuesday afternoon, following a solid third-quarter earnings report Monday. At about 2 p.m., the stock (Ticker: HSTM) was changing hands at $28.64. (Year to date, it's still down 12 percent.) Avondale analyst Richard Close thinks it should climb higher still in the coming months. He has reiterated his 'outperform' rating and $33.50 price target for the Nashville company, which beat analysts' expectations on both the top and bottom lines.
Close said HealthStream continues to build momentum, and with an established customer base, the next phase of growth will be product development. With health reform increasing pressure on provider metrics, demand for workforce training products is expected to rise.
Northland Capital analyst Scott Berg has upgraded his rating of HealthStream shares following the decision by the Department of Health and Human Services to nail down the Oct. 1, 2015, date for providers to transition to the new ICD-10 coding system. Berg now sees HealthStream (Ticker: HSTM) climbing to $33 instead of $30 and says the HHS move "could also yield an additional $5M - $10M in ICD-10 related revenues from this short time delay. We believe this additional revenue can drive upside to current Street estimates."
Richard Close at Avondale Partners has reaffirmed his buy rating and target price of $33.50 for HealthStream, saying that the workforce development company has multiple avenues for growth in addition to its ICD-10 training products. Revenue growth excluding ICD-10 has accelerated above 20 percent, Close said, and the company's other service lines should "foster growth and ease headwind of ICD-10 roll-off."
At about 1 p.m. Central Tuesday, shares of HealthStream were among the market's biggest movers, climbing almost 20 percent to about $26.50 on the back of its solid second-quarter earnings. Volume was heavy, with the number of shares changing hands on track to triple the stock's daily average.
Looking ahead to HealthStream's second-quarter earnings report, Richard Close at Avondale Partners says he won't be surprised if the company's strong subscriber growth slowed. The culprit is likely to be the cloudy outlook during the quarter around the implementation of the new ICD-10 diagnosis and procedure code. But with an Oct. 1, 2015, deadline now in place, Close says investors should get some clarity from CEO Bobby Frist. He expects HealthStream to post pro forma earnings per share of 7 cents, a penny less than the Street's consensus. Shares of the company (Ticker: HSTM) rose slightly to $22.89 Monday but are down about 30 percent so far in 2014.
Stifel Nicolaus analyst Steve Rubis initiated coverage on HealthStream Tuesday, giving the company a 'hold' rating. Rubis has not set a price target for HealthStream, which he said has a competitive advantage thanks to its portfolio of workforce development solutions, but could come up short technologically.
"Although we believe HealthStream operates a strong SaaS-based distribution platform, we believe the company lacks a proprietary technological competitive advantage," Rubis said.
Shares of HealthStream (Ticker: HSTM) were down 2 percent Tuesday to $25.97.
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