Redcare Pharmacy Shares Defy Expectations as New Rival Enters Market

Redcare Pharmacy NL0012044747

The long-anticipated launch of German drugstore giant dm into the online pharmacy sector was expected to rattle established players. Yet, when the move finally went live on Tuesday, the opposite occurred. Redcare Pharmacy's stock, rather than selling off, posted notable gains. This surprising strength suggests investors may have already priced in the competitive threat.

For shareholders, Tuesday's advance provided a welcome respite. The stock has faced significant pressure this year, down more than 52% since January and recently hitting a new 52-week low of €60.35 in November. From a technical perspective, the price action showed initial signs of life, with the share price climbing past its 21-day moving average—a level often watched by traders for early signals of potential stabilization.

dm's Online Launch: A Managed Threat

Competition in Germany's online pharmacy market intensified this week as dm commenced its mail-order business for over-the-counter medications. Shipments will be handled from its physical pharmacy in Bor, Czech Republic, a structure designed to comply with regulatory requirements. The market's reaction was notably calm; Redcare's shares gained nearly 4% at the open, and rival DocMorris also traded higher. This indicates that the scenario of dm's entry was likely already factored into Redcare's current share price of around €63 euros, with investors relieved that the actual launch did not trigger further panic.

Analyst Sentiment Points to Long-Term Value

Despite near-term operational headwinds and the new competitive dynamic, the long-term investment case for Redcare remains intact according to several analysts. Recent rating changes even point to a cautiously improving outlook:

• UBS: The Swiss bank upgraded its stance on the stock from "Sell" to "Neutral," assigning a price target of €74.
• Bullish Views: More optimistic analysis comes from firms like Deutsche Bank, with a €214 target, and Barclays at €130.
• Consensus: The average price target stands at approximately €143, suggesting many believe the severe sell-off in recent months has been overdone.

Execution is Key to Sustaining Momentum

Whether this positive price movement can be sustained will depend heavily on operational execution. The company has recently strengthened its leadership, appointing Hendrik Krampe as its new CFO effective December 1. Redcare also recently reaffirmed its full-year guidance. Notably, the company demonstrated fundamental growth in Q3, increasing revenue to €719 million despite margin pressures. Tuesday's market action implies that, for now, investors are weighing these solid growth metrics more heavily than their fears of increased competition from the drugstore sector.