Why are Pro Medicus shares rocketing 12% today?

Pro Medicus Ltd (ASX: PME) shares are starting the week strongly.

In early trade, the health imaging technology company’s shares are up 12.5% to $148.88.

Why are Pro Medicus shares jumping?

Investors have been fighting to get hold of the company’s shares on Monday after it announced another major contract win.

According to the release, the company’s wholly-owned U.S. subsidiary, Visage Imaging, has signed a five-year, A$28 million contract renewal with Allegheny Health Network (AHN). The new contract includes the addition of Visage 7 Workflow.

The company notes that AHN is one of the largest health networks in the Pittsburgh metro area, providing care to 29 Pennsylvania counties, as well as portions of New York, Ohio, and West Virginia.

It is a unified network comprised of 14 hospitals, a total of 2,500 beds, and more than 200 primary-care and specialty-care practices in more than 300 clinical locations and offices.

Importantly, the new contract comes with increased per-transaction costs.

Commenting on the contract renewal, Pro Medicus’ CEO, Dr Sam Hupert, said:

We are very pleased to have played such a key role in AHN’s growth over the past 10 years. AHN has now renewed for a third contract term, reflecting the strength of our long-standing partnership and the value our platform continues to deliver across their organisation.

This contract brings our total renewals for the financial year to A$125M, maintaining our track record of client retention. This underpins our belief that our solution provides unparalleled return on investment from both a financial and a clinical perspective.

AI disruption update

In a separate announcement, Pro Medicus’ CEO, Dr Hupert, was asked about his view on whether the company would be disrupted by artificial intelligence (AI). It noted that Pro Medicus shares have fallen heavily, with this the primary driver of the weakness.

The company’s leader doesn’t believe this will be the case. He said:

While share price is always determined by the market, there is little doubt that the SaaSpocalypse fear affected the share price of most, if not all, software companies globally, including PME. I am on record as saying that I believe it is a knee-jerk reaction, and I think we have seen some moderation of the bearish market sentiment that occurred around early January this year.

I also think that our recent wins and recently announced long-term contract renewals tend to disprove the theory that all software companies will be negatively disrupted by AI.

Instead, Dr Hupert sees AI as an opportunity for the company. He also highlights the company’s defensible moat, pointing out that “many have tried to replicate our tech stack over the last 17 years, but no one has succeeded, with or without AI.”

The post Why are Pro Medicus shares rocketing 12% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Pro Medicus. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Pro Medicus. The Motley Fool Australia has recommended Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.