Cerner shares pricey, but upside remains: report
Shares of Cerner Corp
Cerner, a healthcare information technology company, trades in the mid-$50s, or about 22.8 times this year's consensus profit estimates of $2.41 a shares, Barron's said. The weekly financial newspaper, however, cited a Piper Jaffray analyst who revised his 12-month price target to $78.
The reason for the revision is the American Recovery and Reinvestment Act of 2009, which includes $36 billion of incentives to encourage more use of electronic medical records and penalizes healthcare providers who don't, Barron's said.
At many hospitals, which Barron's said are Cerner's big customers, information technology gaps remain, particularly for computerized clinical order entry and electronic medical records.
Cerner generates about 15 percent of its $1.7 billion of revenue from selling licensed software for electronic medical record and order entry systems, Barron's said, calling it a very profitable business.
Cerner was hurt by some capital spending cuts at hospitals, but the company said that the stimulus plan could spur business this year, Barron's reported.
Barron's also said investors might want to wait for a 5 percent or 10 percent sell-off before buying the stock. It also said Cerner should have a clean bill of health for the next several years.
(Reporting by Robert MacMillan; Editing by Jan Paschal)
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