Tag Archives: NASDAQ:WBMD

WebMD: Zacks’ Bear of the Day Play

WebMD (WBMDSnapshot Report) is a $2 billion provider of online health information services to consumers, physicians, employers, health plans, and other healthcare professionals. The company connects with its customers through both public and private portals.

Through its public portals consisting of desktop and mobile offerings, the company provides personalized online healthcare information to consumers on its flagship site, WebMD.com. Revenue is generated primarily through advertisements and sponsorship agreements from pharmaceutical and health and wellness companies.

Through its private portals, like Medscape.com, WebMD offers health management applications for employers and health plans, and generates revenue typically on a per participant basis.

Earnings Roll Over

I last wrote about WebMD in June after another strong quarterly report boosted analyst EPS estimates. The Zacks Rank caught a nice 30% move in shares in the first half of the year from $50 to $65.

But their Q2 report disappointed these same analysts, continuing a trend of lowered estimates that began in July.

In the past two months, the full-year 2016 consensus slipped from $1.88 to $1.82 and 2017 profit projections took a bigger hit, dropping from $2.19 to $2.02. And that’s why the shares of WBMD fell to the cellar of the Zacks Rank this month.

That 8% fall in EPS also brings the growth outlook to just 10.6% for next year, and that probably concerned investors the most after this year’s 20%+ growth. That would explain the drop in shares from $67 to $51 since that late May peak.

Taking Expertise & Access to a New Level

While the stock is on uncertain ground right now, it’s worth reviewing the positive development I noted in June…

On May 17, WebMD announced a new initiative. ColumbiaDoctors and Medscape, the leading source of medical news and information for physicians, would create a partnership that gives physicians using Medscape Consult access to the expertise of ColumbiaDoctors, Columbia University Medical Center’s faculty practice.

More than 25 health professionals from ColumbiaDoctors representing specialties including oncology, hematology, endocrinology, and surgery will serve as Medscape chief editors and associate editors on Medscape Consult, Medscape’s innovative peer-to-peer, point-of-care digital platform. Accessible to physicians worldwide, the Medscape Consult editors will respond to questions, share best practices, and offer expert perspectives.

Renowned experts in their respective specialties, ColumbiaDoctors will provide the Medscape Consult community with evidence-and practice-based insights into patient care, closely aligning with their basic and clinical research.

“Our new partnership with Medscape enables ColumbiaDoctors to share their insights and perspective with a global physician community facing rapidly shifting clinical concerns,” said John Chabot, MD, chief of the Division of GI/Endocrine Surgery, Columbia University Medical Center, and vice president of ColumbiaDoctors.

It sounds like WebMD intends to maintain and grow its superior platforms for health professionals and consumers. But until the estimate picture turns around, it may be best to stand aside. The Zacks Rank will let you know when the turnaround is on.

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500. See today’s Zacks “Strong Sells” absolutely free >>.

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WebMD: Zacks’ Bull of the Day Play

WebMD (WBMDSnapshot Report) is a $2 billion provider of online health information services to consumers, physicians, employers, health plans, and other healthcare professionals. The company connects with its customers through both public and private portals.

Through its public portals consisting of desktop and mobile offerings, the company provides personalized online healthcare information to consumers on its flagship site, WebMD.com. Revenue is generated primarily through advertisements and sponsorship agreements from pharmaceutical and health and wellness companies.

Through its private portals, like Medscape.com, WebMD offers health management applications for employers and health plans, and generates revenue typically on a per participant basis.

The Trifecta: Sales Beat, EPS Beat, Guidance Raised

Last week, WebMD reported 4Q15 results above expectations and provided strong guidance that compelled analysts to raise earnings estimates and price targets.

Management guided 2016 revenue, adjusted EBITDA and EPS above the Street as they are seeing strong ad demand from biopharma and are realizing operating leverage. The expected acceleration of biopharma ad revenue growth to 15% was what impressed analysts the most as it confirms the shift in pharma ad spend from traditional print and TV (offline) to online where WebMD has a leading position in this market.

My colleague Jeremy Mullin wrote about WebMD after earnings, picking the stock among 4 Internet Stocks to Buy Now. Here’s what he had to say…

WebMD sports a Zacks Style Score of “B” in growth, but “D” in value. Because this valuation is in question short sellers have piled in with 19% of the stock short, giving the company a 7.5 short ratio and short squeeze potential. The company’s valuation is something investors have questioned in the past and exceeding earrings expectations is a catalyst for the stock price.

On February 23rd the company reported Q4 earnings of $0.60 a share versus the $0.57 expected. Revenue came in slightly higher for the quarter at $192 Million versus the $191 expected. In addition, the company went on to guide fiscal year 2016 revenue $685-705 Million versus $694 Million. Traffic on the website reached 201 million unique users per month, generating almost 4 billion page views for the quarter, increases of 6% and 7% from the prior year period.

The stock surged almost 5% higher after the numbers. It looks poised to take out all time highs above $60.

The earnings beat isn’t much of a surprise as this makes its fifth EPS upside surprise in a row.

(end of Mullin excerpt on WBMD)

Where is WBMD Going? Follow the Estimates

While the Zacks Rank is a short-term timing model based on the recent direction and magnitude of analyst Earnings Estimate Revisions (EER), what you’ll notice if you track changes in the Rank quarter after quarter is that some stocks keep showing up as Zacks #1 and #2 Rank stocks.

Those are the names that continue to impress Wall Street with the quarterly trifecta of top and bottom line beats and raised guidance. While WBMD’s beats were not spectacular, they have been consistent and steady.

Here’s the proprietary Zacks Price & Consensus chart that shows how stock price often tracks the momentum in annual estimates…

If you want to capitalize on the strong trends in healthcare information management and advertising, WebMD is the stock to watch.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money (FTM) portfolio.