GoodRx Holdings shares surge 37% on strong 2Q results, resolving grocer issue

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GoodRx Holdings ($NASDAQ:GDRX) shares surged 37% in the post-market Monday after the company beat the consensus with its 2Q 2022 financials and announced that its previously disclosed grocer issue has now been resolved. GoodRx shares had sunk after 1Q 2022 results in May, after the company noted a dispute with a grocery chain that had impacted the acceptance of discounts for a group of drugs. The management set the issue’s impact at ~$30M for the previous quarter.

However, revenue for the quarter rose ~9% YoY to $191.8M, beating the consensus estimates of $184.7M, while monthly active consumers fell ~3% YoY to 5.8M. Meanwhile, the net loss for the period dropped ~105% YoY to $1.4M from $31.1M of net income in the prior year period, mainly due to the grocer issue and income tax benefit. It remains to be seen how this will affect GoodRx Holdings’ market and earnings in the long term.

Market Reaction

Most media exposure after the news release was mixed, but the stock still opened at $7.3 and closed at $7.8, a 9.8% increase from the previous closing price of $7.1. This surge indicates that investors are confident in the company’s future despite the mixed media reaction.

VI Analysis

The company’s fundamentals reflect its long-term potential. The VI app makes it easy to see that GOODRX HOLDINGS is strong in growth, medium in asset, profitability and weak in dividend. GOODRX HOLDINGS is classified as ‘cheetah’, a type of company that achieved high revenue or earnings growth but is considered less stable due to lower profitability. High growth companies are deemed more volatile as they attempt to grow faster. GOODRX HOLDINGS has a high health score of 7/10 with regard to its cashflows and debt, is capable to sustain future operations in times of crisis.

Summary

The online pharmacy and drug discount company reported better-than-expected second-quarter results, resolving a key issue with grocers. The company said that it had resolved an issue with grocers that had caused a slowdown in growth. GoodRx said that it will now start to see growth from the grocery channel again. The stock was up 9.8% the following day.