Which European ePharmacy Stock Should You Own? Via Investing.com

Investing.com — When considering which European ePharmacy stocks to own, recent market dynamics suggest a clear preference for Redcare Pharmacy (ETR:) over DocMorris (SIX:).

Analysts at HSBC upgraded their recommendations in a note dated Wednesday, reflecting the divergent performance and outlook of these two players in the European ePharmacy space.

Redcare Pharmacy has consistently demonstrated strong momentum, particularly in its over-the-counter business, where it has seen strong growth for twelve consecutive quarters.

This contrasts sharply with DocMorris, which has struggled with weaker-than-expected results in the burgeoning eRx market, particularly in Germany.

HSBC analysts point to the strong growth gap between the two companies, with Redcare Pharmacy outperforming DocMorris, both in terms of revenue and operating values.

This outperformance led HSBC to upgrade Redcare Pharmacy shares to ‘buy’ from ‘hold’, raising its price target to €155 from €140.

Redcare Pharmacy’s competitive advantage appears to stem from its marketing strategy, particularly its celebrity-focused advertising campaigns, which have resonated well with consumers.

This has enabled Redcare Pharmacy to capture more market share in the eRx space, a crucial area for future growth in the ePharmacy market.

HSBC indicates that if this trend continues, Redcare Pharmacy could continue to overtake DocMorris in the eRx segment, further consolidating its market leadership.

On the other hand, DocMorris faced several headwinds. HSBC downgraded the stock to ‘hold’ from ‘buy’, cutting its target price to CHF 40 from CHF 75.

DocMorris has struggled with slower-than-expected acceleration in eRx adoption, and its higher-than-anticipated investment in customer growth has weighed on its profitability.

“For now, we expect the greater impact of profitability to be on DOCM (rather than RDC), pushing the way to adj. EBITDA breakeven by one year from 2025e to early 2026e,” the analysts said.

HSBC analysts also point to the growing divergence in operational momentum between the two companies. DocMorris has been forced to reduce its guidance due to these challenges, further highlighting the gap between it and Redcare Pharmacy.

Despite this, DocMorris is not without its upside potential, especially if it can successfully pivot its strategy and capture a larger market share in the eRx space in the long term.