Benefitfocus, Inc. and WebMD Health Corp.: Initiation of Research Coverage
Thursday, April 17, 2014
In a comprehensive report about employee benefits administration, William Blair & Company analyst Adam Klauber initiated research coverage of two companies he believes are poised to benefit from the evolving healthcare landscape, Benefitfocus, Inc. (BNFT $33.73) and WebMD Health Corp. (WBMD $43.87). Klauber assigned a Market Perform rating to Benefitfocus and an Outperform rating to WebMD.
In the report, Klauber said "rising costs and an increasingly burdensome regulatory environment are causing dramatic changes to the way in which employee benefits are structured and distributed. As a result, we believe the benefits decision-making chain will be significantly altered with consumers shouldering more responsibility for plan decisions and the associated costs. In addition, employers are looking for ways to reduce the cost and complications associated with benefits administration. We believe that alternative benefit platforms, including private exchanges, high-deductible plans, and defined-contribution funding models, will become the mainstream employee benefits solutions over the next decade."
Klauber added, "It appears that investors as well as strategic buyers and private equity firms have recognized the tremendous growth potential driven by the changing healthcare landscape. We believe the scarcity of publicly traded stocks is fueling these high valuations, which will likely drive additional IPO and M&A activity in these segments over the next 12 to 18 months, significantly expanding the investable universe."
"We recommend buying WebMD to exploit market dynamics," Klauber said. "We believe that WebMD is in prime position to capitalize on the shift toward the consumerization of healthcare. In addition to attractive dynamics in the online-advertising business, we believe the company will be able to monetize its highly focused user base (both consumers and physicians
No, not WBMD. Unless it jumps over 50 to 55 in very near future.
With Schwab, I can not short some of these heavily shorted stocks because they must not have them in there inventory.
How are U shorting @ this point? No are now shares really available to borrow. Unless you are a big player or hedge fund, etc. You must be a big player?
Tracey, we are coming up on some eventful dates from 3 years ago! May 2, 2011, WebMD hit it's high of $58.55, May 5, 2011, the stock closed at $56.54 and then the eventful conference call at 4:45 PM. On May 6, 2011, WebMD closed down $5.58 / off 10% at $50.96 !! I never thought it would drop to $13. Well we are coming back strong 3 years later. Thumbs Up!
PEG of 5+? Get real.
WBMD tells everyone the year looks awful and drives the stock down.
WBMD buys millions of $$ on the way down to $37.
WBMD then says, "Guess what? Things are not as bad as we thought!".
Something smells fishy again....
Way too many other smart places to put $$. If you want to be in healthcare media buy GOOG - they make more money in healthcare advertising than WBMD could dream of.....
Thanks for the articles on Marty, very consistent with my opinions about him. I am now retired, but I am from a corporate culture similar to that of Wygod's. During my corporate days, I had the opportunity to meet with Barry Diller, currently Chairman of IAC Interactive Corp, while he was running QVC. After meeting him and making a presentation to him back in the early 90's, I began investing in any and all Barry Diller companies, QVC, HSN, IAC Interactive and Expedia and made money every time, as did John Malone, one of his former partners of Liberty Media Companies. I mention this as Barry Diller known as "Killer Diller", has a very similar corporate reputation to Marty Wygod. He is a bit of a maverick, who always ends up on top and makes his shareholders plenty of money. I started investing in the Wygod companies starting in the mid to late nineties, as I believed that he was another Barry Diller. It has taken Marty a bit longer with the WebMD company than Diller with IACI, however my return on this investment will be far greater. Since Diller left News Corp. decades ago, he has been in complete control of his corporate destiny as is Marty Wygod. I would also mention that I was introduced to the Wygod companies by a Financial Adviser during the 1990's.
in the end i actually made good money,as i started buying puts from 48 or 49 down trying to remember which,but i knew something was really wrong,and bought all the way down to the high teens.
Steve, I’m impressed by all the work you’ve done!
I’m lazier than you, and I’m looking at things more from the point of view of the psychology of the individual, as P.G.Wodehouse’s Bertie Wooster would say.
I’m Marty’s age, and have followed him since the late 70s, and I suggest you read these three articles on him that you can find in the archives of the New York Times and Business Week:
(I do hope Yahoo permits me to post this, they have a thing about refusing to post web addresses)
As with Medco, Marty’s idea was always that somebody else should pay for the services his company supplied, and in the beginning he hoped the physicians would do that. He obviously didn’t know that American physicians, spoiled by all those freebies they got from the pharmaceutical industry, were not prepared to pay for anything. Then I think he and Wayne Gattinella were sidetracked by the easy money they made through advertising. With the disaster of three years ago, they finally realised that standing on one leg is no way to run such a company. So now they are going back to the original idea, and in the end it will be the consumer who pays for everything, as always. I would think it makes sense for them to pay WebMD to keep their personal health record, and in some other ways the insurers are going to pay as well.
In the end, revenue from this should be much bigger and much more regular than revenue from advertising, which would become the icing on the cake.
Limp, after thinking about your post regarding the new version of WebMD's flagship app and your belief that we will be measuring revenue in billions rather than millions, and a previous post about Marty wanting to build a monument as his last endeavor, I thought I would formulate a 4 year financial growth plan that would get us to the first billion in revenue along with some share price and profit estimates. Here are the P&L parameters: 1) the top line revenue growth rate for 2014 through 2017 would need to be 18% annually: 2014= $608M, 2015= $717M, 2016= $846M, 2017= $1 billion. 2) the bottom line net income as a % of revenue will be: 8% in 2014 or $49M/+227%, 12% in 2015 or $86M/+76%, 16% in 2016 or $135M/+57%, and 20% in 2017 or $200M/ +48%. Assuming the float is maintained at no more than 50 million shares, here are my estimated share prices using profit / profit growth rate/earnings per share and PE ratios for each year : 2014 = $70.00 per share / $49m +227%/ $.98 cents/ PE 70. 2015= $112.00 per share /$86m+76%/ $1.72 / PE 65. 2016= $135.00 per share / $135m +57% / $2.70 / PE 50. 2017= $160.00 per share / $200m / +48% / $4.00 / PE 40. Naturally, the share prices would reach the above levels around the earnings release date in each February of the following year.
The challenge for the CEO, Mr. Schlanger, will be growing revenue at 18% annually with additional revenue streams above and beyond the traditional web based advertising. Note: all of the above PE ratios are below each years % of profit growth rate.
If you look at the all important Revenue/ Net Income lines on the WebMD P&L, you can see one of the reasons for conservative forecasts. WebMD Revenues are now beyond a key inflection point, whereby a greater % of revenue/sales increases above $550 million drops to the all important net income line as the fixed / variable expenses become a much smaller % of each incremental $ of revenue. It's as simple as a persons discretionary income after they pay their fixed mortgage, if your salary is increased from $100 thousand to $125 thousand, you've got a lot more cash for everything else. So, looking at the current top end forecast of $575 million, the bottom line impact for every dollar increase in revenue above that level will influence the net income line dramatically vs. the net profits from sales below the $550 million level..
kudos to limp and steve it looks like our misplaced money from 3 years ago will get replaced and added to.
JJJ, as someone who follows the market, I know that you realize that most stocks that have a dramatic one day move may pull back a bit, especially ones that create a gap on the charts. Yesterday, WebMD had a low of $42.02 which created a gap of $2.77 from the previous day's high of $39.25. Gaps do have a tendency to get filled, sometimes not completely, however, in a corrective market pattern, WebMD could pull back and become another opportunity for Wygod to use the remaining $18 million to buy back stock. I want the stock to appreciate as much as you. As long as mgmts. fine performance continues, we will be OK.
I'm going to go out on a limb and make the assumption that the revised 2014 forecast of approximately $560 to $575 million only represents the revenue from the web advertising platform in it's current form and does not take into account any new revenue streams that may be implemented this year. Although, these new revenue platforms may be small initially, they may increase this year's sales above forecasted expectations.