Shares of GoodRx Holdings (NASDAQ:GDRX) are down more than 40% in premarket trading Tuesday after the company withdrew its FY 2022 outlook.
GoodRx reported Q1 adjusted EPS of 10c, beating the consensus estimates of 8c per share. Total revenue in the first quarter came in at $203.3 million, up 27% YoY and above the analyst expectations of $200.4 million.
For Q2, GDRX expects $190 million in revenue, well below the consensus estimates of $216.1 million. The company said it will not provide FY guidance at this time.
GoodRx also said it saw a major grocery chain take steps that affected the acceptance of discounts from most pharmacy benefit managers (PBMs) for a subset of drugs. The issue left a direct impact on the company’s consumers as the majority of discounts on GoodRx products are provided by PBMs.
As a result, GoodRx saw a sharp decline in volume and expects an even stronger impact on its Q2 and FY performance.
At least 4 analysts downgraded GDRX stock after earnings. Evercore ISI analyst Mark Mahaney moved to In Line from Outperform with a $12.00 per share price target, down from $28.00.
“While [the PBMs] decision may get reversed, the revenue concentration risk was a negative surprise to us and followed last quarter’s warning that depressed new prescription starts would negatively impact GDRX’s Prescription Transaction Revenue segment (75%+ of revenue). All in, we have significantly less visibility into – and confidence in -- GDRX’s topline trends,” Mahaney said in a client note.
Raymond James analyst John Ransom also downgraded to Market Perform from Outperform, citing the same reason. While GDRX didn’t mention which grocer stopped accepting GoodRx discounting cards, Ransom said that checks show it is Kroger (NYSE:KR).
“One PBM tells us that Kroger is directing traffic away from the GDRX discount card to other discount programs, including its own card. We have heard several theories as to why Kroger is taking this course of action, but need to do more legwork to confirm. At any rate, we think the risk that KR remains out of GDRX’s network is real. While the company may, indeed be able to keep its retail network intact and offset some damage, we think that the PTR customer base is smaller than it otherwise would have been, maybe permanently and that the stock will remain in the penalty box until visibility improves,” Ransom wrote to clients.
By Senad Karaahmetovic