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Among the dozens of cloud computing companies, Athenahealth Inc. (Nasdaq: ATHN) might not seem like an obvious top stock to buy.
But investors lured to the big tech firms of Silicon Valley are missing one of the most compelling plays in this rapidly growing sector.
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Athenahealth sells software-based cloud solutions to 114,000 healthcare providers, including hospitals, pharmacies, labs, and practices. The goal is to automate and simplify record-keeping to make providers more efficient.
ATHN is entirely focused on the healthcare cloud solutions for these providers and doesn't have a lot of exposure to the public. That's why you may not be familiar with it.
But unlike many of the companies most often mentioned as top cloud computing stocks - Amazon.com Inc. (Nasdaq: AMZN), Cisco Systems Inc. (Nasdaq: CSCO), Microsoft Corp. (Nasdaq: MSFT) - Athenahealth is a pure play.
It gets all or nearly all of its revenue from the cloud, as opposed to just a portion of it as those big names do.
And the pure plays stand to profit the most from the explosive growth in cloud services expected over the next few years.
Take a look at these numbers...
Why Cloud Computing Stocks Are in a Sweet Spot
Cloud computing stocks already have an impressive track record of growth.
Bessemer Venture Partners, a tech-focused venture capital firm, created an index to measure the performance of 50 top cloud stocks.
Since January 2011 the BVP Cloud Index (which includes Athenahealth) is up 592%, quadrupling the S&P 500's gain of 121%.
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And forecasts for the cloud computing market suggest this kind of growth won't slow down any time soon.
The area of healthcare cloud computing, the segment in which Athenahealth operates, looks especially promising.
According to BCC Research, the market in North America for healthcare cloud computing will more than double from $4.9 billion in 2016 to $10.2 billion by 2022. Athenaheath operates exclusively in the United States.
This represents a lot of opportunity for Athenahealth in its home market, and even more if it decides to branch out beyond the United States.
And the company is well-positioned now to take advantage of this opportunity, despite some negative noise over the past year...
Why Wall Street Is Down on Athenahealth Stock
As a medtech company, Athenahealth has struggled to bring change to an industry resistant to technological disruption. Since 2014 the business has foundered, with ATHN stock going mostly sideways.
After peaking at just over $200 a share in February 2014, Athenahealth stock has zigzagged. It fell as low as $96 in December 2016 before recovering to $150 last summer. Today, ATHN stock trades at $160.90.
That's frustrated Wall Street. Private equity company Elliott Management, which bought a 9.2% stake in Athenahealth in May 2017, has tried to buy out the company several times. Athenahealth management has rejected the offers, including the most recent one this past May of $160 a share.
The company instead started to reorganize under CEO Jonathan Bush, who founded Athenahealth in 1997 to better exploit the growing market for its products.
But Bush - who happens to be the nephew of former U.S. President George H.W. Bush - was forced out earlier this month following allegations of physical abuse of his ex-wife and improper behavior toward female employees.
Those recent struggles have helped keep a lid on ATHN stock, despite being well positioned in the fast-growing cloud computing sector.
And the focus on the past doesn't give enough weight to the changes the company is making to exploit the vast potential before it.
One of the best clues we have that ATHN is a top stock to buy is its Money Morning VQScore™ of 4 - the highest possible score.
And there's plenty of evidence to back that up...
Why ATHN Is a Top Stock to Buy
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.