Redcare Pharmacy: Balancing Rapid Prescription Growth Against Debt and Margin Pressures

Redcare Pharmacy NL0012044747

The investment narrative surrounding Redcare Pharmacy is one of stark contrasts. While the company is reporting explosive growth in its digital prescription business, concerns over its upcoming bond repayment and softer performance in over-the-counter sales are weighing heavily on investor sentiment. The core debate in the market centers on whether the expansion in e-prescriptions can sufficiently offset doubts about long-term profitability and financial stability.

Redcare's shares have declined by approximately 47% over the past twelve months, trading well below half of their 52-week high. Recent weekly performance showed further slight declines, with the price hovering just above its most recent annual low—a clear indicator of persistent selling pressure.

This recent weakness was primarily triggered by a preliminary trading update for the fourth quarter of 2025, released on January 7. Although group revenue for 2025 increased by 24% to €2.9 billion, the market focused on the disappointing figures from the non-prescription (Non-Rx) segment. With Q4 sales of €794 million in this division, Redcare fell about 3% short of market expectations. This shortfall is particularly notable as it occurred in a seasonally strong quarter typically characterized by robust demand for over-the-counter products. Market observers interpret this as a sign that competitive intensity and pricing pressure in the online Non-Rx market are beginning to erode margins.

The Digital Prescription Engine

In sharp contrast, the prescription (Rx) business, especially in Germany, presents a picture of vigorous expansion. Redcare is growing at a pace significantly faster than the overall market, capitalizing on the ongoing digitization of healthcare prescriptions.

Key performance indicators highlight this strength:

• German Rx Revenue 2025: €503 million, a 98% increase year-over-year.
• Q4 2025 German Rx Revenue: €155 million, up 59% compared to the same quarter last year.
• DACH Region Rx Revenue 2025: €1 billion (2024: €750 million).
• Active Customers: 13.9 million, reflecting an addition of 1.4 million within a year.
• Net Promoter Score (Customer Satisfaction): Rose from 72 in Q3 to 74 in Q4.

These metrics underscore Redcare's leading position in the e-prescription and online Rx sector. The challenge, however, is that this growth trajectory must ultimately translate into more stable margins and reliable profitability to counterbalance the skepticism emanating from the Non-Rx segment.

Short Interest and Valuation Context

Currently, around 14% of the company's outstanding shares are sold short—a notably high figure for the German market. This substantial short interest reflects pronounced doubts among professional investors regarding the sustainability of Redcare's margins and the fierce competition in the online Non-Rx space.

From a fundamental perspective, the company's market capitalization stands at roughly €1.34 billion. Based on the 2025 revenue of €2.9 billion, this results in an Enterprise-Value-to-Sales ratio of approximately 0.56. This valuation suggests the market is applying a discount due to uncertainties around profitability and competitive dynamics, despite the impressive top-line growth.

Restructuring the Debt Profile

In the near term, market attention is fixed on a pending payment related to the 2021/2028 convertible bond. On January 21, 2026, Redcare must pay €64.5 million to investors who exercised their put option. This payment represents the final step in a larger debt restructuring initiative launched in 2025.

In April of that year, the company issued a new €300 million convertible bond maturing in 2032 and simultaneously repurchased €157.9 million of the old 2021/2028 bond. Following the upcoming January payment, only €2.6 million of the old bond will remain outstanding. This operation significantly extends the company's debt maturity profile, thereby structurally reducing refinancing risk.

The liquidity position appears solid to support this move. As of September 30, 2025, liquid assets and short-term financial investments (net of bank liabilities) amounted to €265.6 million, up from €177.6 million at the end of 2024. From the viewpoint of many investors, the repayment is therefore manageable, even if it remains a consideration in the current cautious environment.

Divergent Analyst Views

Analyst opinions reflect the company's dichotomous situation. The average 12-month price target is €142.75, but the range is unusually wide—spanning from €74 to €214. This broad dispersion mirrors the different potential scenarios for growth and margin development. Currently, six analysts recommend buying the shares, with no outright sell ratings on record.

A notable recent assessment came from UBS. The bank upgraded its rating from "Sell" to "Neutral," assigning a price target of €74. While this target sits significantly below the consensus, it indicates that some previously very negative scenarios have been moderated, even if the bank does not yet view the stock as a clear winner.

The Path Ahead: March Report as a Key Catalyst

The next critical milestone will be the publication of the full 2025 annual report on March 4, 2026. This report will provide the first detailed look at profitability metrics for the past year and an updated outlook for 2026. Investors will scrutinize the margins in the Non-Rx business, the continued scaling of the Rx segment, and the projected cash generation following the completion of the bond repayment. This data will likely be decisive in determining whether the current cloud of skepticism lifts or if pressure on the share price persists.