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J.P. Morgan Sees Doom And Gloom in GoodRx (GRDX) Stock

TipRanks
·2 min read

Adding to its ever-growing list of business ventures, and building on its 2018 purchase of Pillpack, on Tuesday, Amazon announced it is launching an online pharmacy service. Amazon Pharmacy will allow customers to buy prescription medications online with home delivery available in 45 states.

Amazon Pharmacy will also offer a service and discount card program for Prime members called Prime Rx. Members can benefit from unlimited free 2-day deliveries and are eligible for discounts of up to 80% when paying without insurance. Prime Rx will also provide substantial savings at over 50,000 different pharmacies across the U.S.

It is no wonder Amazon is eying this lucrative market; The US prescription drug market is estimated to be worth $360 billion.

While J.P. Morgan analyst Doug Anmuth points out this is obviously good news for Amazon, and will “further increase the value of a Prime subscription,” the mega cap’s deep dive into the pharmacy world could negatively impact other pharmacy companies, such as GoodRx (GDRX).

“Prime Rx competes directly with the core GDRX prescription transaction offering,” the 5-star analyst said. “Given Prime Rx’s potential to scale, with access to 75M+ US households, we believe the offering could ultimately inhibit GDRX’s ability to grow Monthly Active Consumers and subscribers to GoodRx Gold & Kroger Savings (subscription is ~5% of GDRX revenue). We believe GoodRx’s ~14-15% take rate from PBMs could also be at risk if AMZN participates at a lower percentage.”

Although Anmuth expects Amazon’s offerings to have limited near-term impact, once customers become aware of the benefits of Prime Rx’ discount card and 2-day home delivery, Anmuth expects Amazon Pharmacy will be a “direct risk over the next few years.”

As a result, Anmuth downgraded GoodRx's rating from Neutral (i.e. Hold) to Underweight (i.e. Sell). The price target gets a severe haircut, too, and is reduced from $59 to $29. The new figure implies a 23% downside from current levels. (To watch Anmuth’s track record, click here)

However, amongst Street analysts, Anmuth is currently the lone GoodRx bear. An additional 7 Buys and 6 Holds add up to a Moderate Buy consensus rating. At $52, the average price target is set to provide upside of ~37% in the year ahead. (See GDRX stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.