'Attractive Entry Points' In WebMD And Everyday Health Following Clinton's Sell-Off Plan

Shares of WebMD and Everyday Health have taken a nosedive in recent days on fears and uncertainty surrounding Democratic presidential frontrunner Hillary Clinton’s new prescription drug price capping plan.

Despite the fears, Cowen and Company analyst Charles Rhyee sees the drop as a buying opportunity for both names and believes that Clinton’s plan could end up serving as an important catalyst in the pharmaceutical industry’s transition to digital advertising.

Related Link: What Does Hillary Clinton Have Planned For Biotech?

Ad Budgets In Jeopardy

A major part of Clinton’s plan includes revoking pharma companies’ ability to write off consumer-directed advertising for tax purposes. In addition to eliminating this privilege, Clinton’s plan also calls for a greater percentage of revenue to be spent on research and development.

According to Rhyee, the end result of these changes would be that companies would spend less money on advertising, which could negatively impact brand awareness of name-brand drugs.

Selloff Overdone

Rhyee believes that the selloffs in WebMD and Everyday Health are premature and sees several reasons why investors shouldn’t be worried about Clinton’s plan. Primarily, even if Clinton becomes president, the likelihood that her plan would make it through Congress without substantial modifications is extremely low.

Worst-Case Scenario

Secondarily, Cowen’s long-term bullish stance on both companies revolves less around advertising and more around the companies’ shift toward digital healthcare services.

“So, in our view, while it is unlikely the worst case scenario of lower pharma budgets materially affecting WBMD and EVDY’s ad portal business, we see this business becoming naturally less important anyway,” Rhyee explained.

He added that he sees current levels as “attractive entry points” for both stocks.

Disclosure: The author holds no position in the stocks mentioned.

Image Credit: By State Dept Image by Michael Gross [Public domain], via Wikimedia Commons