OptimizeRx Stock: Top Candidate For My ‘Bio Boom’ Portfolio

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An extended market-wide sell-off will always provide an opportunity for investors to add to a promising investment, or possibly initiate a position in a wish list ticker. For some, a market-wide sell-off can help reveal new tickers that are often heavily discounted and offer incredible risk-rewards opportunities. OptimizeRx (NASDAQ:OPRX) has not been immune to the market-wide sell-off and has lost roughly 83% over the past twelve months despite showing impressive growth and profitability metrics. I believe OPRX is a prime candidate for the Compounding Healthcare “Bio Boom” portfolio at these prices.

I intend to provide a brief background on OptimizeRx and will discuss why OPRX is a Bio Boom candidate. In addition, I discuss some downside risks that OPRX investors should consider when managing their position. Finally, I lay out my game plan for initiating a starter position.

Background on OptimizeRx

OptimizeRx is a healthcare technology company that is devoted to addressing the needs of the healthcare industry by improving engagement amongst patients, providers, and organizations with their point-of-care network. OptimizeRx helps connect 60% of U.S.-based health care providers with millions of patients to help improve patient outcomes. OptimizeRx started off in patient support with financial messaging and aiding in the distribution of samples and co-pay savings. Over time, OptimizeRx has expanded their platform services to broaden communication with companies and organizations, who are looking to build brand awareness. Moreover, physicians are able to monitor patient treatment initiation, treatment affordability, and adherence.

OptimizeRx Connecting Care

OptimizeRx Connecting Care (OptimizeRx)

The company’s business model focuses on growing its customer base which will increase its recurring revenue all while the company continues to expand its platform abilities by launching new solutions. The company’s unique platform and solutions have encouraged some of the biggest and best names in healthcare to become customers.

OptimizeRx Pharma Customers

OptimizeRx Pharma Customers (OptimizeRx)

As a result, OptimizeRx has been on a solid winning streak with impressive revenue growth of 49.5% CAGR over the past decade.

OptimizeRx Financial Performance

OptimizeRx Financial Performance (OptimizeRx)

A “Bio Boom” Candidate

The Bio Boom Portfolio contains healthcare companies that are either pre-revenue or commercialized. These companies are typically not profitable and are highly speculative, however, they offer substantial upside due to a potent upcoming catalyst, projected revenue growth, or a potential turnaround. Normally, these are small to mid-cap companies with volatile tickers that will offer recurrent trading opportunities to help generate substantial profit while developing a “house money” position. These tickers will be traded as long as it is in play or the company graduates to the Bioreactor Portfolio.

Although OptimizeRx is a profitable company, I am not seeing the steady revenue growth and technical momentum that will allow me to put OPRX in the Compounding Healthcare Bioreactor Portfolio. Therefore, I am looking to put OPRX in the Bio Boom Portfolio at this time. Indeed, Bio Boom is intended to be the holding pen for my more speculative ideas than OPRX. However, I believe OPRX does have several Bio Boom characteristics that point to notable upside potential from these current prices.

First and foremost, is the company’s current valuation compared to earnings and projected earnings. OptimizeRx’s market cap is roughly $270M, yet, the company is expected to pull in around $64M this year, which is about 4.25x forward price-to-sales. Considering the industry’s average price-to-sales is around 5x, we can say OPRX is slightly undervalued for its 2022 revenue. However, the company is expected to report double-digit growth over the next two years and hit around $95M in 2024, which is a ~2.85x forward price-to-sales. So, I believe it is safe to say that OPRX has the prospects to justify a higher valuation now, and in the future.

OptimizeRx Revenue Estimates

OptimizeRx Revenue Estimates (Seeking Alpha)

Indeed, we don’t know if the company will hit these estimates, but I believe the large and expanding market of $10B+ along with the industry’s trend toward digital solutions could allow OptimizeRx to hit those estimates.

Digital Commercial Spend in Healthcare

Digital Commercial Spend in Healthcare (OptimizeRx)

Having an attractive technology, platform, market, or business model is another key Bio Boom characteristic, which can become a strong moat against competitors. OptimizeRx not only has a unique technology but that platform is the largest point-of-care communications network in the United States and has the majority of the top 20 pharmaceutical manufacturers in the world. So, not only does OptimizeRx have the advantage of being the largest network, but they also have the biggest customers. Therefore, I don’t foresee a smaller company challenging OptimizeRx’s position in the near future.

Another key characteristic of Bio Boom is the potential for a rapid move toward profitability. Indeed, the company reported a positive net income in 2021 and should do the same this year. However, the company has a history of failing to hit the Street’s expectations, which has injected some volatility into the ticker. Thankfully, OptimizeRx is projected to experience aggressive growth that should ultimately outpace the company’s expenses. Thus, de-risking the investment and allowing the market to appropriately value OPRX.

Furthermore, A Bio Boom candidate needs to have cash. Admittedly, most speculative healthcare companies that have cash will ultimately burn through it to support clinical trials and/or commercial efforts to extract growth. Although OptimizeRx is likely to report a net positive for 2022, it is still going to need a healthy cash position to have on hand if the company decides to pull the trigger on another acquisition to maintain growth or improve their services. Luckily, OptimizeRx finished Q2 with over $87M in cash and short-term investments and basically has no debt.

Lastly, a Bio Boom candidate needs to be seen as an opportunity to get in on a ticker that is discounted, underfollowed, unjustified sell-off, etc. Typically, a Bio Boom candidate has one or two of these labels, but OPRX has a few. Primarily, I believe OPRX is underfollowed compared to other small-cap healthcare tickers. Sadly, healthcare technology stocks don’t get the same hype as biotech or pharma, so, it is logical that OPRX is overlooked despite having a bullish outlook. This provides us an opportunity to establish and accumulate a position in OPRX while the market’s attention is elsewhere.

Considering the points above, I believe OPRX belongs in the Compounding Healthcare Bio Boom Portfolio.

Risks To Consider

Despite my bullish outlook for OPRX, I have to admit that the company has a few downside risks to consider. Primarily, financial messaging solution in healthcare is not exactly a crowded space, however, FinTech companies could decide to step into the space and become serious competition for OptimizeRx. It is possible that these companies decide to acquire one of OptimizeRx’s peers such as ConnectiveRx, Luma Health, or SureScripts. Yes, OptimizeRx distinguishes itself with the size of its network, platform tech, new solutions, and customer base, however, we have to anticipate there will be others challenging the company to take their market share and claim one of their big pharma customers. It would only take a few of these customers to leave to a competitor to ruin OptimizeRx’s bull thesis.

Considering this, I am assigning OPRX a conviction level of 3 out of 5.

OPRX Game Plan

The ticker has been beaten down over the past twelve months losing around 83% with little-to-no signs of a technical setup for a reversal. As a result, I am looking to initiate a position once I see a reversal set-up under my Buy Threshold of $16. Once I have established a starter position, I will look to make periodic additions in 2023 until I have accumulated a full-sized position by the end of the first half.

OPRX Daily Chart

OPRX Daily Chart (TrendSpider)

On the other hand, I will be looking to quickly book profits on OPRX. I will set a few sell orders around my Sell Targets in order to transition my position into a house money status for a long-term investment.

Long term, I am expecting to maintain an OPRX position for at least five years in anticipation that the company will report steady growth and will ultimately graduate to the- Compounding Healthcare Bioreactor growth portfolio.

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