On Wednesday, Mizuho (NYSE:MFG) initiated coverage on GoodRx Holdings Inc. (NASDAQ:GDRX) with a Neutral rating and a price target of $5, close to the current trading price of $4.91. The firm's analysis follows GoodRx's optimistic analyst meeting held in May 2024, where the company provided revenue compound annual growth rate (CAGR) guidance of +6-12% for the years 2024 through 2026. GoodRx also set targets of approximately $1 billion in revenue and EBITDA margins exceeding 35% by 2026. According to InvestingPro analysis, the company appears undervalued based on its Fair Value metrics, with impressive gross profit margins of 94%.
Despite the positive long-term outlook presented by GoodRx, Mizuho expressed concerns about the impact of recent store closures by several large retail drug chains on the company's performance for the second half of 2024 and into 2025. The closures are perceived as a significant risk that could compromise GoodRx's ability to achieve its 2026 revenue guidance. Current revenue growth stands at 7.14%, and InvestingPro data shows the company maintains a strong financial health score, operating with moderate debt levels.
Mizuho's projections for GoodRx's revenue in 2026 stand at $860 million, which falls short of the company's target of around $1 billion and is below the current Street consensus of $890 million. The firm estimates a reduced revenue CAGR of approximately 4-5% for the calendar years 2024 to 2026, compared to the company's more optimistic guidance.
Furthermore, Mizuho's earnings per share (EPS) estimate for GoodRx in 2026 is $0.44, which is also lower than the Street's expectation of $0.48. The $5 price target assigned by Mizuho reflects a 25% discount to GoodRx's three-year historical average price-to-earnings (P/E) ratio. This discount is applied to account for the increased risks associated with the retail prescription market that GoodRx is facing.
For deeper insights into GoodRx's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which includes detailed analysis of the company's financial health and market position.
In other recent news, GoodRx Holdings Inc. has reported a positive growth trajectory despite challenges in the retail pharmacy sector. The company's third-quarter financial results revealed an 8% year-over-year increase in total revenue, reaching $195.3 million.
Additionally, the adjusted EBITDA grew by 21%, with a margin of 33.3%. The company's growth has been impacted by retail pharmacy closures, specifically Rite Aid (NYSE:US90274J5618=UBSS), and the sunset of the Kroger (NYSE:KR) Savings Club, affecting revenue by approximately $5 million.
Despite these challenges, GoodRx remains optimistic about its future, expecting revenue around $200 million in Q4 and projecting single-digit growth for 2025. This optimism is underscored by a projected 20% increase in pharma manufacturer solutions revenue. The company is also expanding its Integrated Savings Program to include uncovered brand medications, with a launch expected in early 2025.
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