CERN stock: Cerner could be the target of an acquisition soon
To identify (NASDAQ:CERN), the medical software company, is not having a good year, but CERN’s stock has been on a roll since March.
Credit goes to the cloud industry. The Tsars of the Clouds Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) as well as the major application players Oracle (NYSE:ORCL) and Selling power (NYSE:CRM), seek to expand the old enterprise software market by integrating pre-existing industries into the cloud, including healthcare.
Cerner is one of the biggest players in this space. Much of its electronic health record (EHR) software is already cloud-based. She stumbles too: her CEO is going out, and the shares sell for just 4.4 times earnings. The most recent quarter showed less income than a year ago.
Cerner is a wounded gazelle and the lions are hungry.
What is the most interesting rumors is the dog that does not bark, Amazon (NASDAQ:AMZN).
Amazon’s AWS has been Cerner’s cloud partner. Amazon quietly launched a health tracker last year, built around Cerner software. If another cloud giant bought Cerner, it would be a direct loss for Amazon.
But that’s not how Amazon played the game. When it comes to the enterprise software space, Amazon is neutral. It doesn’t have a suite of apps. With a market cap of $ 23.6 billion, Cerner is also outside Amazon’s normal price range. Amazon’s biggest contract was Whole Foods, which cost $ 13.7 billion in 2017. Its big current problem is MGM, a bolt-on to Amazon Studios that costs $ 8.45 billion.
While a roll-up is underway in enterprise software, this is not the first time that this has happened. Oracle and SAP (NYSE:SAP) played this game in the 2000s, gaining dominant positions in database software.
Then the game changed. Oracle and SAP have been overtaken by the rise of the cloud. Amazon, for example, is worth seven times that of Oracle and almost 10 times that of SAP. Longtime SAP CEO Bill McDermott surged end of 2019 at Service now (NYSE:NOW), a cloud application player closer to Salesforce. (ServiceNow has a market cap of $ 92 billion, so it might also be interested in Cerner.) Salesforce, meanwhile, is busy swallowing Soft (NYSE:JOB), for nearly $ 28 billion.
This leaves Microsoft and Google as other plausible buyers.
Microsoft would seem to be the most logical buyer. The Cerner software runs on Windows. Microsoft is the main cloud provider according to Cloud wars, but just number six in the industrial cloud. Given its dominance in enterprise software, however, the deal could face rigorous antitrust scrutiny.
On the other hand, Google Cloud has been very aggressive under the leadership of CEO Thomas Kurian. He wrote corporate agreements left and right. Google Cloud’s first-quarter revenue grew 45.7% from a year ago, but the unit lost $ 974 million. On the flip side, Google has $ 135 billion in cash and titles on the books, so it could easily buy Cerner for cash. Since it still ranks third in the cloud market, behind Amazon and Microsoft, it is less likely to face antitrust review. It also has cloud entries in healthcare with a healthcare API (application programming interface) and the Fitbit tracker.
CERN stock assessment
Any move on Cerner could spark an old-fashioned takeover battle, with White Knights, Black Hearts, and arbitrageurs betting on higher prices.
With no redemption premium, Cerner is inexpensive. It has a cloud-compatible price / earnings ratio of nearly 30 and a quarterly dividend of 22 cents / share yielding a return of 1.12%. Once the game launches, it will be too late to make a big profit, so if you’re interested, now is the time.
Whichever cloud giant loses, he could take it out Epic Society (OTCMKTS:EPOR), no connection with the game company, to take a stake in the electronic health record market. There is also McKesson (NYSE:MCK) and private Meditech.
But Cerner would be the price, and if it did, the CERN stock might be worth salvaging now.
At the time of publication, Dana Blankenhorn held LONG positions in AMZN, NOW and MSFT. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.
Dana blankenhorn has been a financial and technology journalist since 1978. He is the author of The Big Bang of Technology: Yesterday, Today and Tomorrow with Moore’s Law, available from the Amazon Kindle store. Write to him at firstname.lastname@example.org, tweet it on @danablankenhorn, or subscribe to his Sub stack.