Monday, July 16, 2012

Healthstream ( Nasdaq - HSTM ) -- Supreme Court Ruling Solidifies Outlook

Healthstream (HSTM $26.25) appears on track to report excellent on target Q2 results.  The company has accelerated spending on sales and marketing to amplify future performance.  So margins may narrow a bit.  Healthstream also sold stock earlier in the year, increasing dilution.  Earnings comparisons are likely to be muted as a result.  Momentum is likely to build in subsequent periods as new products start contributing, market share expands further, and Healthstream's complementary research services perk up again.  A recent acquisition isn't likely to boost results materially, although the software obtained promises to reinforce the company's current line up.

The Supreme Court decision to uphold the Affordable Care Act promises to boost demand.  Most of Healthstream's sales currently are generated from hospitals that use the technology to train personnel.  More patient traffic at those facilities promises to reinforce what already is an upward trend in demand.  Our estimates are unchanged.  New products and acquisitions hold the potential for faster growth in future periods.

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