Goodrx Holdings Inc (NASDAQ: GDRX) ended nearly 20% up on Thursday after a Citi analyst issued a bullish note on the California-based telemedicine company.
Daniel Grosslight assumed coverage of the healthcare stock this morning with a “buy” rating and a $7.0 price target that represents a 60% upside on its previous close.
He’s constructive on Goodrx as it benefits from inefficient drug distribution. The note reads:
It feeds off the exhaust of a complex and opaque drug distribution channel which, in our view, disadvantages patients. That said, we don’t see the irrationality/complexity/opacity of drug distribution abating anytime soon.
The analyst is applying a multiple of 15 times on the estimated adjusted EBITDA for fiscal 2023. Versus the start of 2022, Goodrx is currently down more than 80%.
Grosslight agrees that rising competition and renegotiation with Kroger remain a headwind for Goodrx stock but is convinced that these are not existential headwinds and can only moderate EBITDA margin and revenue growth in the near term.
Last month, the pharmacy discount cards company reported its financial results for the third quarter that handily topped Street expectations. The analyst wrote:
In our view, GDRX will continue to serve a vital role in bringing transparency/consumerism to a historically unshopable market.
Goodrx, though, guided for its fourth-quarter revenue to fall between $175 million and $180 million. In comparison, analysts were at $204 million. Also in November, Wheel acquired Goodrx Care’s backend virtual care technology.
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