Why GoodRx Stock fell 13% in October
Shares of GoodRx Holdings (GDRX -1.32% ) fell 13% in October, according to data provided by S&P Global Market Intelligence. The company only went public via an initial public offering (IPO) on September 23, so October was its first full month of trading. In this context, here is a possible reason why the stock fell in October: the market is still looking for an appropriate price for this promising health-focused technology company.
This is why some investors choose not to invest in IPOs in the first place. In the early days, IPO shares can be volatile as Wall Street assigns a valuation that matches the trading opportunity. In addition, at the beginning, all shareholders held only a short time. This lack of personal history could easily persuade them to get out of a stock if it goes down a bit.
GoodRx is trading at over 41 times ending sales (a high valuation), and retail investors are still wondering if the stock is worth it. Don’t feel bad if you fall into this category: professional analysts are also divided on this opportunity!
According to reports from The Fly, opinions vary, ranging from believing the stock will beat the market to simply matching market performance. And price targets range from $48 to $70 per share (a very wide range), according to data found on TipRanks.
GoodRx is a stock on my watch list, but it’s not because I fear that typical IPO volatility. Rather, I watch how federal policy regarding prescription drug prices is changing now that the US presidential election is on the books. Maybe nothing will change in the end. But this company currently generates the majority of its income by providing coupons for drugs, so that’s a big deal.
And exactly how GoodRx’s business model works can be a bit complicated to understandso investors should also spend a lot of time making sense of it all.
Watching and waiting, it’s soothing to remember that major stocks can worsen shareholder returns for years or even decades. If GoodRx is one of those great investment opportunities, it will still be a great long-term buy several months from now. Therefore, one can wait on the sidelines while searching for answers to the remaining questions.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.