Redcare Pharmacy: Record Revenue Fails to Impress Amid Profitability Concerns

Redcare Pharmacy NL0012044747

Despite posting record annual sales, Redcare Pharmacy's shares have faced significant downward pressure. The online pharmacy group is experiencing a stark divergence in performance between its booming German e-prescription business and its more profitable, but now slowing, over-the-counter (OTC) segment. For investors, the focus has shifted from pure growth metrics to the critical question of when—and if—the company can deliver sustainable profitability.

The market's skepticism is clearly reflected in the stock's performance. Currently trading at €58.50, the share price has touched a fresh 52-week low, marking a decline of approximately 50% over the past twelve months. Since the start of the year, the loss totals roughly 12%. Having fallen more than 57% from its 52-week high, the market has aggressively corrected the stock's previously lofty valuation. The share's position, nearly 32% below its 200-day moving average, confirms it remains entrenched in a pronounced downtrend.

A Record Year Overshadowed by a Mixed Final Quarter

For the full year 2025, Redcare Pharmacy achieved substantial growth, raising the bar significantly. Revenue climbed by 24% to €2.9 billion, up from €2.4 billion the previous year. This operational result underscores the continued expansion in demand for online pharmacy services.

However, the picture was more nuanced in the fourth quarter. While group revenue increased by 18% to €794 million (from €675 million), this figure fell short of analyst expectations by about 3%. The primary culprit was weaker performance in the high-margin Non-Rx (over-the-counter) segment:
* Q4 Non-Rx Revenue: Increased 9% to €483 million, approximately 9% below consensus estimates.
* DACH Region Non-Rx: Came in about 10% below expectations.
* International Non-Rx Revenue: Was roughly 3% under forecast.
* Full-Year Non-Rx Revenue: Reached €1.9 billion (2024: €1.6 billion).

Given that the Non-Rx business is traditionally a key profit driver, the loss of momentum in this area explains the market's tepid reaction to otherwise solid growth rates. Following a trading update on January 7, the stock shed around 8% in a single day.

E-Prescriptions Fuel Explosive Growth in Germany

In contrast, the performance of the prescription (Rx) business in Germany tells a markedly positive story. Redcare is clearly benefiting from the nationwide rollout of the digital prescription and growing acceptance of digital health services.

In Germany, Rx revenue surged by 98% year-on-year in 2025, reaching €503 million compared to €254 million. This exceeded the company's own target of "more than €500 million." Momentum remained strong in Q4, with German Rx sales advancing 60% to €155 million, slightly ahead of consensus estimates.

Additional operational metrics highlight the underlying growth narrative:
* Active Customers: 13.9 million (an increase of 1.4 million year-on-year).
* Net Promoter Score: Rose to 74 in Q4 (from 72 in Q3).
* Full-Year DACH Rx Revenue: €1.0 billion (2024: €750 million).
* International Revenue: €540 million (a 23.7% increase from €436 million).

Overall, the DACH region generated Q4 revenue of €656 million, a 17.5% increase from €558 million in the prior-year period. The data indicates the platform is successfully attracting customers, improving satisfaction, and seeing powerful expansion in prescription sales. The central issue is not growth itself, but its cost.

The Path to Profitability Remains the Critical Test

Redcare's earnings potential continues to be scrutinized. The company reaffirmed its guidance for an adjusted EBITDA margin of 2.0% to 2.5% for 2025. Nonetheless, it still expects to report a net loss of approximately €35 million.

Valuation adds another layer of complexity. With a price-to-sales ratio of 0.5, Redcare trades above the European consumer retail sector average of 0.4 and significantly higher than some competitors at around 0.2. This implies the market is already pricing in substantially above-average future growth, despite profitability not yet convincingly materializing.

All eyes are now on March 4, 2026, when Redcare will publish its final 2025 results and provide initial guidance for 2026. Demonstrating concrete margin improvement alongside sustained revenue growth will be a crucial test for the stock's ability to recover from its current lows.

Analysts See Significant Upside Despite Weakness

Even with the share price weakness, several research firms maintain a positive outlook. Recent analyst assessments include:
* Deutsche Bank: "Buy" rating with a €200 price target.
* Berenberg: "Buy" rating with a €165 price target.
* Barclays: "Overweight" rating, though it lowered its target from €130 to €110.
* UBS: Upgraded from "Sell" to "Neutral," with a €74 price target.

The average price target derived from these stands at approximately €131.50, implying more than a doubling from current levels. UBS characterized the Q4 figures as "in line with our expectations" and suggested the results could be received positively given the stock's weak performance throughout 2025.

The wide range of targets—from €74 to €200—highlights the divergence of opinion. Analysts agree, however, that the share's fate is heavily dependent on the company's future earnings trajectory.