Pro Medicus share price tumbles despite $47m contract renewal news

Pro Medicus shares are been sold off today despite some good news…

| More on:
A woman looks distressed as she stares dramatically at her phone

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Pro Medicus Limited (ASX: PME) share price has started the week deep in the red.

This is despite the healthcare technology company making a very positive announcement this morning.

At the time of writing, the Pro Medicus share price is down 5% to $39.20.

Why is the Pro Medicus share price sinking?

Investors have been selling down the Pro Medicus share price after the market selloff overshadowed news of a couple of major contract renewals.

According to the release, the company's Visage Imaging business has signed two key contract renewals with a combined value of $47 million.

The release reveals that Sutter Health, which is a large IDN based in California, has signed for a further seven years, whereas Pennsylvania-based Wellspan Health has signed for a further five years.

Pleasingly, both deals are transaction based with committed minimums and have been negotiated at a higher per transaction cost than their original contracts.

'A positive message'

Pro Medicus' CEO, Dr Sam Hupert, was pleased with the renewals and highlights the unusually lengthy term extensions and higher transaction costs. He believes this is a testament to the quality of the technology.

Dr Hupert commented:

The industry norm for renewals is for short extensions to the original contract at the same or lower price. The fact that our clients have renewed for a full or longer contract term at an increased price supports our belief that the Visage solution delivers unparalleled value both in terms of financial and clinical ROI.

Whilst it is still early days, our renewal success rate sends a positive message to the market and helps build on the network effect that we have been experiencing.

The Pro Medicus share price is currently trading within a fraction of a 52-week low following today's decline despite this positive news.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Pro Medicus Ltd. The Motley Fool Australia has positions in and has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

Why is this ASX fintech stock suddenly crashing 22%?

This stock is having a very bad start to the week. What's going on?

Read more »

Three businesspeople leap high with the CBD in the background.
Technology Shares

Guess which ASX All Ords stock is leaping 12% today

Why is this stock having a strong start to the week? Let's find out.

Read more »

A young man working from home sits at his home office desk holding a cup of tea and looking out the window
Technology Shares

Pro Medicus shares higher on $30m contract win

Good news is lifting this high-flying stock on Monday. Let's dig deeper into it.

Read more »

Robot humanoid using artificial intelligence on a laptop.
Technology Shares

The best ASX AI stock to invest $500 in right now

The team at Morgans thinks this is one of the best ways to invest in AI on the ASX.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Technology Shares

This ASX All Ords stock just crashed 25%! Here's why

Let's find out what is making investors rush to the exits on Thursday.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Technology Shares

What's going on with Xero shares today?

The tech stock has made an announcement this morning relating to its CEO.

Read more »

Three analysts look at tech options on a wall screen
Technology Shares

Why did this small-cap ASX tech stock just explode 39%?

Investors are piling into the ASX tech stock on Wednesday. But why?

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Technology Shares

Investors should put these 2 top ASX tech shares on the watchlist

These tech companies have enormous potential, in my view.

Read more »