Telemedicine GoodRx Has Potential To Excel, Close Valuation Gap By 2025, Analyst Says

Wells Fargo upgraded GoodRx Holdings Inc GDRX, noting 2024 guidance has good visibility with upside potential to both estimates & valuation multiples.

Wells Fargo analyst anticipates that GoodRx’s EBITDA margins could surpass expectations in 2025, suggesting a favorable outlook for the company. 

Despite potential challenges from strategic shifts in the past two years, such as initiatives to enhance member retention and partnerships with pharmacy benefit managers, there are signs of improved revenue visibility and reduced downside risk. 

Wells Fargo upgraded GoodRx from Equal Weight to Overweight, with a price target of $10, up from $7.50.

In February, GoodRx reported fourth-quarter FY23 results and issued first-quarter revenue guidance above estimates. GoodRx expects fiscal year 2024 revenue and adjusted revenue of $800 million.

This sets the stage for GoodRx to exceed consensus estimates in 2024 and outperform expectations in 2025, narrowing the valuation gap with its peers and likely leading to significant stock performance over the next year. 

The analyst writes that 2025 estimates for revenue and EBITDA are slightly ahead of consensus, reflecting optimism regarding enhanced gross margins and sales and marketing efficiency. 

While these strategic pivots have somewhat restrained growth, they have also mitigated risks. Additionally, recent data on web traffic indicates a positive trend, with GoodRx experiencing a rise in monthly visitors while its competitor, SingleCare, has seen a decline. 

Overall, GoodRx appears well-positioned to consistently execute with potential upside in revenue and margins, offering an opportunity for recovery in valuation multiples.

Price Action: GDRX shares are up 10.3% at $7.26 on the last check Monday.

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