athenahealth ATHN
athenahealth is the poster child of the cloud 'bubble basket' — strip Morgan Stanley's fantasy margin and revenue-per-doctor assumptions and the stock falls 80%+ toward a $50 adjusted DCF.
Thesis
David Einhorn's Sohn 2014 presentation introduces Greenlight's 'bubble basket' short thesis using athenahealth as the illustrative specimen. The argument is explicitly not fraud — CEO Jonathan Bush is 'well-meaning and honest, though occasionally promotional' — but that shares tripled to $204 in sixteen months while revenue and EPS estimates were cut. Einhorn dissects Morgan Stanley's $192 DCF, showing it requires revenue per doctor to rise from $16K to $63K by 2030, EBIT margins to expand from 10% to 30%, and athena to win 6% of a hospital market Epic already dominates. Adjusting each assumption to something defensible yields a $50 base-case value and a $14 bear case versus a $127 share price. Structural headwinds — hospital consolidation, EHR saturation, capitation, and CEO capital misallocation — make ATHN a falling knife with much further to fall.
SCQA
athenahealth is a cloud software-and-services vendor to U.S. ambulatory physicians, charging 4-7% of collections for EHR, practice management, and patient communication; shares tripled to $204 in 16 months through early 2014.
Revenue and EPS estimates were cut throughout the run-up; the stock price only clears conventional DCFs when sell-side analysts plug in implausible long-run inputs — 4x revenue per doctor, tripled EBIT margins, and a speculative hospital launch against Epic.
Strip the implausible inputs from Morgan Stanley's $192 DCF: normalize revenue per doctor to $36.6K, cap ambulatory and inpatient EBIT margins at 15%, apply a venture-grade 20% WACC to the unproven inpatient business.
Adjusted DCF collapses to $50 per share versus $127 at presentation — a ~60% drawdown to the base case, and a $14 bear case that is roughly a market multiple on current non-GAAP earnings, implying ~80%+ further downside.
The three reasons
- 1
Morgan Stanley's $192 DCF requires 30% EBIT margins and $63K revenue per doctor by 2030 — both implausible
- 2
Epic's near-100% retention and 275K doctors makes hospital expansion a dead-end for athena
- 3
Adjusted DCF is $50/share vs. $127 spot; bear case is just $14 on 13% margins
Primary demands
- Short athenahealth shares as the illustrative 'bubble basket' example
- Reject Morgan Stanley's $192 DCF built on implausible revenue-per-doctor and 30% EBIT margin assumptions
- Recognize Epic Systems — not athenahealth — is winning healthcare IT
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- WebMD (2004 'transform healthcare' pitch that failed)
- Other unnamed cloud 'bubble basket' stocks (Workday, ServiceNow, Veeva, Demandware, Salesforce, Netsuite)
Notable slides (6)
Notes
Einhorn's famous Sohn 2014 'bubble basket' short — the opening thesis of the broader cool-kid-stocks critique Greenlight teased in its Q1 2014 letter. Classic rhetorical scaffolding: wordplay chapter titles (Schtimulation, Bush v. Gore, Capitation, Capital misallocation), heavy use of CEO video clips and quote-contradiction, and a WebMD-reveal closing analogue. Explicitly not a fraud thesis — Einhorn calls Bush 'well-meaning and honest'. Structure is effectively a reverse-DCF attack on a specific Morgan Stanley sell-side report (April 23, 2014). Stake percentage not disclosed. Visual design is basic dark-gradient PowerPoint with heavy use of stock imagery and screenshots; narrative craft is top-tier. Stock was at $127 at time of presentation; shares fell ~14% the day of the speech.