Healthways takes its biggest dive yet

UPDATE - Analyst remains bullish despite today's trouncing

Email | Print By Walker Duncan

UPDATE: NashvillePost.com spoke with former Avondale analyst Brooks O’Neil, who now covers Healthways for Dougherty & Co. in Minnesota about today’s dive.

"We're in a more volatile market environment right now," he said, adding that the stock's runup to $70 late last year involved "a lot of investors getting ahead of themselves in regard to the MHS pilots programs."

Despite the thumping the stock has taken since - and the fact that Dougherty today cut its ’08 earnings target from $1.77 to $1.51 per share – O'Neil remained unswayed from his generally bullish outlook on the stock. The company, he said, is still an attractive investment given current EBITDA figures and trading multiples.

O'Neil's bullishness is also bolstered by an article in today’s Wall Street Journal that projects government and total healthcare spending will surge to more than $2 trillion and $4 trillion, respectively, by 2017.

"The lion's share of that will likely be spent on chronic conditions," O'Neil said, noting that Healthways is well positioned to reap some of the benefits such a surge could provide for disease management.

Helping out in the near term, he said, is the fact that nearly all of Healthways' main competitors either have been or are in the process of being acquired. Dealing with the natural challenges of integration will likely hamper their ability to compete, at least in the near term.

In that vein, there have also been rumblings that Healthways itself could be a buyout target. O'Neil acknowledged that a buyout could be a possibility down the line if the stock continues to suffer.

Should the stock, in fact, languish around $30 for an extended period, a prospective buyer could see an opportunity to snap up the company at a bargain.

Note: A replay of the conference call hosted by Healthways this morning is available here.

Article as originally posted:

Healthways shares are continuing their six-week search for bottom today with a staggering 34.8 percent drop. As of noon CST, shares were going for $29.55, a price not seen since 2004. Trading volume was roughly 10 times its average.

The drop comes following the company’s slashing of its ’08 guidance this morning following the loss of two potential contracts. Shares, which were tipping the scales at nearly $70 in January, have suffered greatly on the heels of a poor review from CMS and rumors of other potential contract losses.

NashvillePost.com has sent queries to a number of analysts covering the stock and will update this story with any information they provide.