Living up to his reputation as a showman, the ringmaster of Athenahealth, Inc (NASDAQ:ATHN), CEO Jonathan Bush, appeared on CNBC this morning and responded to accusations his stock, which had been trading at a much higher multiple of price to earnings than its peers, was a value. Doing this might be somewhat of a challenge since in the interview he said he had no idea of how valuation worked.
Athenahealth CEO says “$1,000” stock price… at some point
“I am absolutely sure Athenahealth, Inc (NASDAQ:ATHN) is a $1,000 per share stock,” Bush said as he boiled over with excitement on the CNBC set. “I have no idea when it gets there,” he later qualified, as the stock traded off its bubble high near $200 a share to exchange hands near $108 in early morning trading. “I don’t know anything about valuations, so for all I know (Einhorn) is right,” Bush later added.
“Greatest hope for economic growth in this country”
“This business model holds the greatest hope for economic growth in this country for the next decade or two,” Bush said.
Greenlight Capital co founder David Einhorn said Athenahealth, Inc (NASDAQ:ATHN) is a “bubble” stock that could fall 80 percent or more from its peak share price of more than $204 in March. He also said the company’s potential products are being overvalued.
Why has the Athenahealth, Inc (NASDAQ:ATHN) stock price risen so high? Bush chose a common theme of demagoguery. Is the stock rising because “we have a business unfriendly government” and in such an environment their company looks better than average, he questioned.
The apparent shell game continues when trying to define the company and compare it to a peer group, an exercise that Bush likes to avoid. Making the case that Athenahealth, Inc (NASDAQ:ATHN) is not comparable to other firms – thus talking up a higher than average valuation – he said “It is not a BPO. It’s not even a SASS company. It is a software enabled service,” a new category without easy comparison to peers.
When defining the company Bush said: “What somebody should do is look back at [doctors] that have been on the network for a while. There are five, six products you can buy. Most of them try one, get on, and then little by little by little, they add products. Maybe they have big discounts in the beginning that go away over time. As they add products, the revenue-per-doctor on the network of the more mature ones goes up and up and up.”
After the interview CNBC host Jim Cramer simply said Athenahealth, Inc (NASDAQ:ATHN) is a medical records company and they are overvalued.