Why athenahealth, Inc Stock Got Hammered Today

What happened

Shares of athenahealth (NASDAQ: ATHN)are down 18% as of 11:32 a.m. EDT following the release of the company's first-quarter earnings report after the bell yesterday.

So what

Superficially, the quarter wasn't that bad for the healthcare technology specialist; revenue grew 11.4% year over year.

Many companies would gladly take double-digit revenue growth, but when shareholders are used to growth in the 20% range, 11% growth feels like a losing quarter, and investors are going to adjust their valuations accordingly.

The use of athenaOne by hospitals and Athenahealth's population health products are still going strong, with growth of 88% and 25% quarter over quarter, respectively. The slowdown in growth came from its athenaOne product used in the ambulatory setting, which grew by 2% to 6% quarter over quarter for the different healthcare providers the company tracks.

Despite the increase in revenue, adjusted earnings dropped to $0.32 per share from $0.34 per share in the year-ago quarter, although a lot of that had to do with research and development costs increasing more than 41% year over year, which will hopefully boost sales with better products in future quarters.

Image source: Getty Images.

Now what

The slower growth caused management to lower its full-year 2017 guidance. Athenahealth now expects 2017 revenue in the range of $1.21 billion to $1.25 billion, down from the previous guidance of$1.29 billion to $1.33 billion.

Earnings guidance was also adjusted down, with an expectation for 2017 GAAPoperating income between $36 million and $46 million, down substantially from previous guidance in the range of $61 million to $81 million.

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Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends athenahealth. The Motley Fool has a disclosure policy.