New Lows Ahead for This Healthcare Stock, Says Analyst

CERN stock is lower on a downgrade at Morgan Stanley

by Andrea Kramer

Published on Feb 28, 2019 at 10:34 AM

Electronic medical records provider Cerner Corporation (NASDAQ:CERN) was slapped with a downgrade to "underweight" from "equal weight" at Morgan Stanley, which cited challenging long-term growth prospects. The brokerage firm also sliced its price target on CERN shares to $47 from $68 -- representing expected downside of 17.5% from Wednesday's close of $56.99, and in territory not explored since 2013. As a result, Cerner shares are down 2.9% at $55.35 in early trading.

CERN has been in a channel of lower highs and lows since peaking above $73 in October 2017. The equity's most recent low of $48.78 was touched on Dec. 24, but a subsequent rebound stalled in the face of its 120-day moving average. Today, CERN is attempting to find support around its 50-day moving average, which hasn't been breached on a daily closing basis since Jan. 25.

Recent option buyers are likely kicking rocks in the wake of the security's bear gap. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 10.61 is in the 85th percentile of its annual range. This indicates that Cerner option traders have initiated bullish bets over bearish at a faster-than-usual pace in the past two weeks.

Meanwhile, there's plenty of room on the bearish bandwagon for more analysts to join Morgan Stanley. CERN currently boasts 12 "strong buy" opinions, compared to eight lukewarm "holds" and one "strong sell."

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