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You already know the economic recovery from the pandemic is going to be great for travel, dining, and entertainment, but it's also going to be great for a surprising sector: healthcare.
As the pandemic hit in early 2020, March and April saw the first drop-off in consumer healthcare spend in 60 years. That equated to almost $3 billion a year that was typically spent going to doctors for checkups, monthly prescriptions, and even cancer care. While healthcare spending has partially rebounded, many are still waiting for the end of the pandemic.
This could finally be happening very soon. The Unites States is now administering more than 2 million shots per day. We are now over 100 million doses administered with 20% of the adult population being fully vaccinated and 25% with at least one dose.
Not only does it mean that people can start getting back to the office, but it means people can start getting back to the doctor and getting the care they need.
This is a big part of the reason why I see GoodRx Holdings Inc. (NASDAQ: GDRX) as such an interesting reopening play.
Even better, it's a strong company that's flying under the radar right now.
You see, everyone is already piling into the trendy recovery stocks, but that could backfire in a big way.
Here's why every recovery stock isn't the same and why that makes GoodRx one of the best stocks to buy now...
Don't Get Burned by the Trendy Recovery Stocks
Cruise ship, airlines, and movie theater stocks are doing great. But there is a lot to be careful of here as the stock price does not always tell the whole story.
Let's take Carnival Corp. (NYSE: CCL) for a moment. Just looking at the stock chart, it is still trading almost 50% below its pre-COVID-19 peak. That's making it a popular bounce-back stock. It would have to double to get back to pre-pandemic levels.
But if you include debt and look at its enterprise value, it's already completely recovered.
This is why we need to be careful when we are looking to invest in the reopening economy.
Companies carrying a high debt load may be overburdened if they cannot grow at a fast enough pace to pay off their debt. On top of that, Carnival paid a significant premium on its debt as it was pandemic driven. Just look at the rates it is getting versus companies like Apple that have also issued bonds. In 2020, Carnival priced $4 billion in debt at 11.5% and in February 2021 at 5.75%. Meanwhile, Apple issued billions of bonds at a fraction of that rate at 0.7%.
While it may have the free cash flow to continue to pay off debt, any slowdown in vaccine rollout or hesitation from consumers to get on cruise ships could send this stock spiraling downward and could have serious implications on the future of Carnival.
That is why I'm looking at a company that has actually reduced its long-term debt over the last three years and has enough cash on hand to pay it all off if it needed to. It has also done this while keeping up revenue growth over 30% for the last three quarters.
But this can go even higher as the economy opens up, leading me to one of my favorite economy reopening plays.
GoodRx Could Be the Big Post-Pandemic Winner
Over the past year, the COVID-19 pandemic has overwhelmed healthcare systems across the country and has forced millions to skip treatments and medications. As the economy opens back up, there is less of a reason to skip a doctor's appointment and pick up medicine at the local pharmacy.
This could lead to an uptick in business as GoodRx takes a lead in helping people reengage with physicians and to seek care. Doctors recommend the service because the coupons help patients stick with their prescriptions, and GoodRx makes it easy for doctors to use with a separate app to send coupons to their patients.
Just look at the situation our healthcare system is in. Spend per person in the United States was over $10,000 a year. That's over 40% higher than in Switzerland, the country with the next highest per-capita health spending and roughly double the comparable country average. On top of that, there are roughly 30 million uninsured and many more under-insured, leading to some of the lowest levels of quality healthcare in comparable countries.
This means that affordable healthcare is out of reach for many Americans and is leading to inadequate care and personal bankruptcies. In fact, 20% to 30% of prescriptions in the United States are not even filled. Someone is dying every four minutes in the U.S. from not taking prescribed medicine as directed or at all.
Doug Hirsch and Trevor Bezdek created GoodRx to help fix this. GoodRx is a health tech company focused on making healthcare affordable through its prescription drug pricing comparison and saving platform and telemedicine offerings.
At a glance, GoodRx has been the most downloaded medical app in the last three years, has over 18 million monthly visitors, works with over 70,000 pharmacies and has saved customers over $25 billion.
With a core business in providing both insured, uninsured, and consumers on Medicare with the best available drug prices, GoodRx has empowered the consumer, leading to 42% revenue growth in 2020.
Search is also very important for GoodRx, and it is a leader in that channel garnering 13.4 million visitors from search engines every month, which is more than SingleCare, ZocDoc, WellRx, Talkspace, One Medical, Teladco, Amwell, and PillPack combined.
It has thousands of pages for every drug name, and most of them rank in the top two in Google when you search for the drug name and coupons. This is very impressive and helps to bring in new customers.
There is pent-up demand for going to doctors' offices, and GoodRx could see an influx of usage as people start getting the medicine they need.
GoodRx is also building in optionality to its platform as it increases the number of services it offers. Outside of the free coupon service, it offers a subscription savings program called GoodRx Gold. This offers frequent users over 1,000 prescriptions for under $10, mail delivery, and price alerts. It is also moving into the telehealth space. This could end up being a big win for GoodRx as it already has inroads with customers and physicians.
That's why the business is exciting.
But the stock looks even better...
Why GoodRx Stock Is a Buy Now
With 95% gross margins, almost $1 billion in cash and guiding for 35% revenue growth for 2021, GoodRx is in a strong position heading into the economy reopening.
While net income was negative this past quarter, it was primarily driven by nonrecurring stock-based compensation. Adjusted net income was actually positive and grew 40% compared to the prior year. This reflects its ability to deliver profitable growth.
On top of that, 80% of customers show repeat use of the platform, showing that there is significant customer stickiness.
The stock has been under pressure since early February and is trading down roughly 30% - this pullback could provide a good entry point as the economy opens back up. Part of the reason for the depressed price is around the lower-forecasted growth for Q1 at 20% and 35% on the year along with the threat of Amazon getting into this business.
I believe the Amazon move is overblown as Google Trends doesn't show an uptick for its service and GoodRx has the relationships with pharmacies, doctors, and PBM networks that drive revenue.
It is also guiding for slower growth as the year prior was an unseasonably strong quarter, and with the current COVID-19 pandemic, there has been a lack of flu. In the medium to long term, this should have no impact on the stock. With the vaccine rollout going smoothly and the stock price hovering near lows, it could be a great time to start averaging in.
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