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Redcare Pharmacy: Analyst Upgrade Expects Significant Gales growth in Q2 due to e-Prescription

Redcare Pharmacy is the largest online pharmacy in Europe with around 11 million customers in 7 different countries and over 80,000 parcels shipped per day. This is probably just the modest beginning, as the introduction of e-prescriptions has made filling a prescription online just as easy as in a bricks-and-mortar pharmacy. Although Redcare Pharmacy cannot offer its customers better prices than a pharmacy due to the fixed prices of prescription medicines, millions of people are expected to order over-the-counter (which are cheaper online) and prescription medicines together via the Internet in the future. It is also more convenient for many people with limited mobility or in rural areas without nearby pharmacies. Reminders via app, personal recommendations and better availability of medication round off the offer.

The death of pharmacies in Germany and other European countries indicates that many bricks-and-mortar pharmacies do not stand a chance in competition with online retailers. Analyst Martin Comtesse from Jefferies sees the current share price weakness as a buying opportunity and emphasizes the importance of e-prescriptions for the German market. He rates Redcare as Buy with a target of €180.

The major Swiss bank UBS analyzed Redcare Pharmacy for the first time in mid-May and issued a Sell recommendation with a price target of €86, whereupon the share price collapsed. Analyst Olivier Calvet sees the growth potential of the German e-prescription as already priced in and views Amazon Pharmacy as a long-term threat.

There is now fresh tailwind from analysts such as Warburg Research, who upgraded their recommendation from Hold to Buy on June 24 with a target  of €138. Analyst Michael Heider expects the sales growth from the e-prescription to become visible in the second quarter.

How Redcare performed in the second quarter could be clear by the beginning of July. The company is known for communicating preliminary sales figures for the previous quarter. The half-year report will follow on July 30.

Redcare Pharmacy has raised its profile in Germany, its largest market, with the introduction of the e-prescription and the signing of Günther Jauch as its advertising face. With the new Cardlink redemption channel, which enables e-prescriptions to be redeemed via an electronic health card, Redcare is addressing previous challenges and further opening up the market for prescription medicines.

Redcare plans to increase its revenue by 30-40% in 2024 by expanding its product offering and using extensive data for personalized offers. Analyst Gerhard Orgonas from Berenberg sees Redcare as one of the favorites among mid-cap stocks for 2024 and puts the price target at €190.

Redcare Pharmacy's high order volume and larger customer base enable it to leverage economies of scale, which lead to lower procurement costs and more efficient operations. These efficiency gains can improve margins. In the medium to long term, the company is still aiming for an adjusted EBITDA margin of over 8%. With a P/S ratio of just under 1, the group should make the leap into the profit zone this year.

Conclusion: Redcare Pharmacy is benefiting greatly from the digitalization of healthcare and e-prescriptions. Analysts see great potential, despite some critical voices. Cardlink could prove to be a game changer and with a current P/S ratio of less than 1 and a market capitalization of €2 billion, this potential is probably not yet fully priced into the €250 billion European pharmacy market.

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