Why Is GoodRx Stock Going Up?

Prescription drug prices have risen to the point that a third of Americans say they can’t afford to take their prescribed medications. Inflation has played a role in pushing up prices, but are drug companies amplifying price hikes?

Rising healthcare costs have been a persistent problem for years, especially for the uninsured and underinsured, the market GoodRx (NASDAQ: GDRX) was mainly designed to address when it was founded in 2011.

Through the GoodRx app, customers can compare drug prices at different pharmacies, and even use the company’s promotional codes in lieu of insurance.

The prospect excited investors after the company’s initial public offering in 2020. First priced at $33 per share, GDRX soared above $55 per share in 2021. Then, disaster struck. In 2022, GoodRx warned that its partnership with Kroger hit a roadblock and that it wouldn’t meet its guidance for the year.

GDRX plummeted, trading below $5 later that year even though GoodRx mended fences with Kroger shortly thereafter.

After a bumpy 2023, the stock ended up gaining over 46% in the past 12 months. Currently trading under $10 per share, far from where the stock traded just a few years ago, investors are wondering which way GDRX will go.

So is GoodRx stock going to keep going up?

Why Is GoodRx Stock Going Up?

GoodRx stock is going up because management reporting revenue up 6.7% to $196,6 million in its recent earnings report. The top line beat analysts estimates by 0.39%

It was a good way to close out a tough year, as total 2023 revenue of $750.27 million was 2.12% less than total revenue in 2022.

GoodRx ended the quarter with a net loss of $25.87 million, up substantially year-over-year from the 1.97 million loss in 2022. But going into the red didn’t come as a surprise to industry analysts, and the company actually beat diluted earnings per share estimates for the quarter by 18.8%

On a positive note, the company increased active users for its prescription-related offerings to 7 million in the 4th quarter. In addition, revenue from prescription-related transactions increased 11% to close out 2023, jumping from $129.4 million to $143.9 million.

Even if 2023 didn’t quite match up to the year prior, management expects a more positive 2024. It issued guidance that full-year revenue should increase by around 7% to $800 million.

The company also expects adjusted EBITDA of around $250 million for the year. All in all, the earnings release was well received by investors, and GDRX gained over 20% at one point after the news.

Will GoodRx Stock Keep Going Up?

While the 4th quarter was mostly positive for GoodRx, a few lingering concerns exist. The company’s rocky partnership with Kroger hit another stumbling block, and Kroger announced it will be ending the popular Kroger Rx Savings Club subscription plan on July 1, 2024.

The loss of revenue from the Kroger partnership has already started to make an impact because subscription revenue dropped by 6% in Q4. Revenue from the Savings Club was $1 million less than the previous year. While increased subscribers made up for the loss of revenue to some extent, it could become an issue as the plan closes out.

On a more positive note, GoodRx announced that it repurchased around 14.1 million shares for $77.8 million in Q4. In February, the company announced it intended to buy back $450 million more shares, though no specific timeline was set.

Then came more good news for GDRX holders, when the company recently reported that a data breach at partner Change Healthcare would not affect GoodRx customers. That’s big news because the company paid a $1.5 million penalty in early 2023 for violating the Federal Trade Commission’s Health Breach Notification Rule.

GoodRx Analysts Ratings

The company ended 2023 on a solid note, but there are still concerns about whether the revenue beats can continue.

Analysts haven’t quite bought in on GoodRx stock yet, with 12 out of 19 analysts in the Hold camp. The average price target is $8.25 per share, which is modestly higher than where the stock currently trades.

There are 6 Buy ratings on GDRX, and the highest forecast has the stock gaining up to $14 per share in the next year, which would be a 73% improvement. There is one Sell rating, and the lowest forecast has GoodRx shares dropping by 38% to $5 per share over the next 12 months.

Is GoodRx Stock Undervalued?

New products may fuel some stock movement, but investors are concerned that revenue growth can continue. There’s also the concern that the stock has become a bit overvalued after the recent rise. GoodRx shares are currently trading at a price-to-sales value of 4.4, which is lower than the industry at large.

GoodRx hopes to further user engagement by optimizing its product, including the recent launch of Medicine Cabinet. It’s designed to help patients manage their prescriptions and refills much more effectively and help lower medication costs.

GoodRx Stock, Buy or Sell?

The hurdles with the Kroger partnership have hurt GoodRx stock and the loss of subscribers from the end of the Kroger Rx Savings Club could continue to impact the share price. Nonetheless, the company was able to overcome lagging subscriber revenue and end 2023 in a positive way.

GDRX share price appears undervalued according to analysts who have a consensus $8.44 per share price target on it. A further bullish tailwinds stems from a considerable stock repurchase plan that is planned.

With new products on the way that could streamline the app and more benefits for customers on the horizon, it is  certainly a stock that bears watching.

Despite the good indications, there hasn’t been enough to sway the majority of analysts or investors yet. If GoodRx can capitalize on its Q4 results, though, that may very well change in the near future.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.