GoodRx Holdings Inc. (GDRX) Customer Concentration Valuation Cut Likely Permanent, PT Halved to $14 at BofA Securities

BofA Securities analyst Justin Post lowered the price target on GoodRx Holdings Inc. (NASDAQ: GDRX) to $14.00 (from $28.00) after a large grocer (25% of transaction volume) stopped accepting discounts on GoodRx (and competitor) transactions while it completes negotiations with multiple PBMs. This comes as Rev/EBITDA of $203mn/$65mn, beat Street consensus at $200mn/$58mn while Monthly Active Consumers (MACs) grew 12% y/y to 6.4mn.

The analyst reiterated a Neutral rating, stating "Loss of these volumes could impact 2Q revenues by up to $30mn if the issue isn’t resolved in 2Q, and company provided a 2Q outlook at $190mn vs Street at $126mn. We expect an early resolution to PBM negotiations and estimate a rebound in GDRX revenue in 3Q. However, miss does highlight GoodRx’s dependency on other industry participants, a possible valuation headwind." "We remain constructive on GoodRx's ability to increase TAM as medicine goes digital. However, we think 2Q outlook may raise some new uncertainties on long-term margins (will grocery/pharmacies looking for a bigger cut of industry profits?). One of our concerns since its listing has been stock valuation at well over 10x revenue, and while we see valuation (at 4x '22 revenue using close yesterday $10.75) as more supportive here, comps are down significantly as well."

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