Seeking Alpha
Editor's notes: HSTM's limited niche and decelerating revenue growth could cause the market to reconsider its high, SAAS-like multiple. Buysider Terry Lally sees 55% downside.

Investment Summary

Short HealthStream (HSTM) at $33.30

$15 Target Price (30X 2015 P/E, 10X 2015 EBITDA) for +55% expected return over the next 1 year timeframe.

Special Situation, US$, Equity Short Recommendation

Enterprise Value of $826m with 27.7m FD shares, $104.7m net cash.

Our HealthStream short thesis is very simple.

1) Earnings Estimates/Embedded Expectations are too high and will be coming down (Déjà vu)

2) Multiple Rerating: Momentum musical chairs game with valuation based on SAAS perception revenue multiple with revenue growth juiced by ICD 10 steroids. Momentum investors bail before they expect the music to stop. ICD 10 renewals create a 2015 revenue growth headwind which suggests significant revenue growth deceleration, the kiss of death catalyst for...

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