Analysts at Stifel GMP have reiterated their ‘Buy’ rating for CareRx Corporation (TSX:CRRX), a leading provider of specialty pharmacy services to seniors in Canada, on their view that the company can navigate near-term challenges such as a tight labor market for pharmacists following the release of its first quarter results.
For 1Q, CareRx posted a 2% year-over-year decrease in revenue to $91.4 million and a 21% drop in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to $6.8 billion. However, it narrowed its net loss by 22% to $2.1 million.
Stifel’s analysts wrote that during 1Q, the company was navigating headwinds with the loss of a large customer, challenges with the healthcare labor market, and generic entry for one of its largest drugs sold into long-term care homes.
“CareRx, a 19% market share leader, reported 1Q results that mirrored the prior quarter with low growth and margins,” they wrote in a note to clients.
The analysts repeated their ‘Buy’ rating on the stock, noting that headwinds had largely been priced into the stock at 6x EBITDA, along with an improved balance sheet with $40 million in cash.
They downwardly revised their price target on CareRx stock from C$5 to C$4.25, which is still almost double the company’s current share price of C$2.25.
“As CareRx adds new scale, efficiencies are expected for a market share leader at 19%,” they wrote.
“Take-out prospects remain as well for this pure-play pharmacy stock, but we refine our estimates to reflect the near-term economic realities of the business, leading to a slightly lower target price.”
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