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Why GoodRx Holdings Stock Went Up More Than 15% in January

By Jon Quast - Feb 4, 2021 at 9:17AM

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It appears to have benefited from traders bidding up stocks with a lot of short interest.

What happened

Shares of GoodRx Holdings (GDRX -8.20%) went up 15.6% in January, according to data provided by S&P Global Market Intelligence. The company did make a couple of investor presentations during the month and even scored an analyst upgrade. But these events didn't correspond with the stock's biggest moves. From Jan. 21 through Jan. 26, GoodRx stock was up 21%.

So what

GoodRx stock's gains did, however, correspond with a major stock market event. GameStop stock also made its biggest moves during late January. At that time, almost any stock with a lot of short interest received a pronounced boost. This applies to GoodRx stock as well. According to Yahoo! Finance, almost 29% of the stock's float is sold short and it would take more than six trading days for shorts to cover. That's not anywhere close to what GameStop's short interest was, but it's still a lot.

A chalkboard displays a line graph that visualizes dollar signs getting larger over time.

Image source: Getty Images.

GoodRx stock has attracted a lot of bearish sentiment for a variety of reasons. This includes a valuation risk, considering it currently trades at almost 40 times trailing sales. Then there's also the perceived looming threat of Amazon disrupting its business. However, don't count Guggenheim's Vikram Kesavabhotla among the bears. During January, Kesavabhotla started covering GoodRx stock by giving it a buy rating and a price target of $52 per share, according to The Fly. 

Now what

To be sure, GoodRx has a lot to prove when it reports earnings later this month. Management guided for revenue of $148 million, good for 31% year-over-year growth. Given its pricey valuation, I believe it will important to at least hit that number.

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Stocks Mentioned

GoodRx Holdings, Inc. Stock Quote
GoodRx Holdings, Inc.
$8.17 (-8.20%) $0.73, Inc. Stock Quote, Inc.
$2,216.21 (-1.98%) $-44.89
GameStop Corp. Stock Quote
GameStop Corp.
$91.80 (-6.70%) $-6.59

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