Analysts are optimistic that primary-care upstart One Medical can shake off its stock-market slump

• Primary care upstart One Medical’s stock has fallen 34.7% in the last three months.
• Its losses in the first quarter of 2021 were double what analysts expected. 
• However, most analysts have reaffirmed their positive buy ratings, pointing to ongoing expansion.
• See more stories on Insider’s business page.

After its most recent earnings call in May, One Medical appears to have lost its immediate stock market luster. 

When the San Francisco-based primary care company reported that its losses per share were double what analysts expected, the company’s stock dropped 8.4% in after-hours trading – a sign some investors are skittish about One Medical’s financial future. 

As of Monday morning, One Medical’s stock was down about 22% since the start of 2021. From its February high, the company’s valuation had declined by about 44%.

Despite CEO Amir Dan Rubin reporting that One Medical had acquired 598,000 members by the first quarter of 2021, a 31% increase compared to the same period last year, the company’s stock has dipped by over one-third of its peak value in mid-February. 

However, One Medical’s short-term fluctuations in stock price have little to no relationship to its ability to expand its core business model, Stephanie Davis, SVB Leerink’s healthcare technology and distribution analyst told Insider.

One Medical’s membership base includes patients who have access to its telehealth platform and brick-and-mortar primary care clinics through an employer, as well as direct consumers. 

The company’s second-quarter results could be a key test for the company as vaccinations increase, Davis said.

Lower COVID-19 testing numbers likely contributed to One Medical’s falling stock price

Some of One Medical’s declining valuation since February stems from reports that the company had let younger, healthier patients receive the COVID-19 vaccine early, including some personal connections of One Medical’s leadership team. 

Rubin denied the “gross mischaracterizations” of line-skipping in a follow-up call to investors, but later issued a letter vowing to improve after the House’s coronavirus crisis committee opened an inquiry into One Medical’s vaccine administration.

In line with increasing vaccination rates and falling case numbers nationwide, the company also noted that its COVID-19 testing volume declined earlier than expected. It’s a part of the reason for the drop in One Medical’s valuation, Davis said. 

On its first-quarter earnings call, Rubin also highlighted One Medical’s recent partnerships with major health systems and Pareto Health, a Philadelphia-based employee benefits company that works with 1,400 employers nationwide.

Through Pareto, those company’s employees will now have access to One Medical membership. Both moves are par for the course and relatively unsurprising given One Medical’s broader plan of expanding nationwide, Davis said.

Despite the stock market’s initial reaction, most research analysts in the digital health space still think One Medical’s tech-enabled primary care model will pay off in the long run.

Across all Wall Street credit research firms covering One Medical, three analysts rated the stock as “hold” and 12 others issued a “buy” rating, according to MarketBeat.

In SVB Leerink’s most recent note on the company, Davis’ team lowered One Medical’s price target from $55 to $53, rating it as an outperformer.

The second quarter will be key for One Medical to show whether the company can grow

Looking at the company’s near future, Davis sees the next fiscal quarter as a test of whether or not One Medical’s business outside of COVID-19 testing and vaccinations will continue to grow.

“You’ll see what it looks like in a more normalized environment, so they can continue to show strong membership numbers,” Davis said. “The new wins that they have in the employer market – that should be more than enough.”

Across publicly traded healthcare companies, the market is shifting away from companies whose overall business model seemed favorable during the worst of the pandemic, like the telehealth company Teladoc. One Medical is being unfairly bucketed as one of those companies, Davis said, despite specializing in primary care.

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