Being a health tech wunderkind has its advantages, like being able to host wacky parties while saying it's all about creating a new healthcare information technology paradigm, the way CEO Jonathan Bush does for his company, Athenahealth. But there's also a downside that Bush is discovering, namely naysayers who short your stock because of little things like your price-earnings ratio being in the stratosphere.
Hedge fund manager David Einhorn has had Athenahealth in his short-selling crosshairs since spring, reports Fortune. Indeed, Athenahealth common shares were down $2.14 to $148.42 a share in early trading Tuesday, the day after the Fortune piece published, and have been under selling pressure since Dec. 23 when the stock closed at $152.50. Its 52-week high was $206.70 a share, so it's down substantially from that as well.
Einhorn doubts Athenahealth, which is involved in electronic health records and collections, can live up to the hype Bush and other investors have built around it. Einhorn calls it a bubble stock. “The valuation is so high that even if the revenue was growing considerably faster, it would still be too high,” he said in the Fortune article.
It's not unusual for tech stock prices to outrun earnings big time. The question becomes, can the company actually deliver on its promise? Some, like Apple, do so in spades. But many others littered the market landscape in the dotcom crash of the early 2000s.
Bush thinks critics like Einhorn are short-sighted and can't see the long-term the way he does. The market will eventually tell him if he's right or not.
Follow John N. Frank on Twitter: @MHJFrank