Solid Performance and Growth Potential Secure GoodRx a Buy Rating Despite Market Overreaction

Citi analyst Daniel Grosslight maintained a Buy rating on GoodRx Holdings (GDRX – Research Report) yesterday and set a price target of $10.00.

Daniel Grosslight has given his Buy rating due to a combination of factors, including GoodRx Holdings’ solid performance in the recent quarter and the potential for future growth. The company reported revenue at the top end of its guidance and exceeded both the consensus and Citi’s expectations, showing a strong 7.6% year-over-year increase. Adjusted EBITDA also surpassed expectations, with margins around 32%. GoodRx’s PharmaManSol segment demonstrated notable strength with approximately 20% year-over-year growth, outperforming predictions significantly. Despite some customer incentives impacting the Prescription Transaction Revenue (PTR), the overall performance remained steady. Subscription revenue met expectations, balanced by an increase in subscription rates despite some membership attrition due to the end of a partnership. Additionally, GoodRx raised its full-year guidance modestly, indicating confidence in its revenue and adjusted EBITDA projections for the upcoming fiscal year.

The recent sell-off of GoodRx’s stock, which saw a 9% decrease, appears unwarranted to Grosslight, especially given the company’s solid financial results and raised guidance. He believes that the market’s reaction may stem from overly high expectations, particularly concerning the Prescription Transaction Revenue (PTR) and the new initiatives like the Insurance Plan Savings (ISP) program. Grosslight argues that, despite facing some challenges, such as the vitaCare prioritization, the termination of the grocer subscription plan, and the fallout from the Change Healthcare hack, GoodRx’s underlying growth is strong when these factors are excluded. Looking forward, Grosslight is optimistic about the company’s upcoming investor day and its ability to demonstrate value to investors, along with the introduction of medium-term targets that may reassure stakeholders. Consequently, he maintains a Buy rating with a high-risk classification, reflecting the potential for substantial returns balanced by the acknowledged risks.

According to TipRanks, Grosslight is a 4-star analyst with an average return of 12.1% and a 46.30% success rate. Grosslight covers the Healthcare sector, focusing on stocks such as R1 RCM, Teladoc, and GoodRx Holdings.

In another report released today, Barclays also maintained a Buy rating on the stock with a $9.00 price target.

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GoodRx Holdings (GDRX) Company Description:

GoodRx Holdings Inc provides digital healthcare platform that provides prescription drugs at affordable prices. The company offers services like diabetes testing, general visits, blood tests, HIV testing, Vitamin D screening, Pregnancy testing, and many more.