Janney Montgomery Scott Initiates Coverage of Drugstore.com (DSCM) with a Buy

June 10, 2009 8:19 AM EDT

Janney Montgomery Scott initiates coverage of Drugstore.com (Nasdaq: DSCM) with a BUY rating and $3.00 fair value.

Janney analyst says, "We believe investors should accumulate the stock during the seasonally slow second and third quarters and while the company completes its transition out of the Rite Aid Local Pick Up (LPU) business. We believe DSCM is poised for a multi-year trend of improving free cash flow (FCF). Specifically, we believe FCF should increase an impressive 58% in fiscal year 2010 driven by (1) a recent acceleration in customer growth, (2) new growth opportunities including micro- sites and International, (3) an important partnership launch with Medco, and (4) a continued focus on operating discipline which is fueling margin expansion. Moreover, we believe the earnings potential of the Medco deal is not fully appreciated by the Street. Our FY 2010 EBITDA estimate of $20 million is $5 million above consensus. Our $3.00 fair value is based on a multiple of 20x our FY 2010 FCF/share estimate and a 2010 EBITDA multiple of 12x."

To see more analyst ratings on DSCM Click Here.

drugstore.com, inc. is an online provider of health, beauty, vision, and pharmacy products. The Company offer health, beauty, sexual well-being, household and other non-prescription products and prescription medications, through its Website at www.drugstore.com.

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