UBS Upgrades DocMorris to Neutral on Improving Margin Outlook

UBS has upgraded online pharmacy DocMorris to a “Neutral” rating from its previous “Sell” recommendation, citing evidence of a sustained turnaround in the company's operating margin. In a research note, the bank also more than doubled its price target on the stock to 10.70 Swiss francs from 4.00 francs.

Revised Financial Forecasts

The upgrade is underpinned by a more optimistic financial outlook. UBS analysts attribute the improving margins to a better sales mix, reduced discounts on over-the-counter products, and tighter cost controls. The bank has raised its projections for DocMorris's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for fiscal years 2026 through 2028.

Key forecast updates from UBS include:

• Adjusted Group EBITDA Margin: Forecast to reach 7.3% by fiscal 2030, a significant improvement from an estimated negative 4.4% in fiscal 2025.
• FY 2026-2028 Sales: Forecasts for net sales are now 2-3% above consensus for 2026 and 2027, based on LSEG and Visible Alpha data.
• FY 2026-2028 Adj. EBITDA: Projections for adjusted EBITDA are now consistently ahead of market consensus for the period.

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UBS also lifted its market share forecast for online pharmacies in the German prescription drug market, citing DocMorris's recent top-line momentum. The bank now sees the company capturing around 36% of that online market by 2030.

Caution Remains on Cash Flow

Despite the more positive view, UBS stopped short of a “Buy” rating, highlighting significant hurdles that remain for the company. Analysts noted that DocMorris's free cash flow is not expected to turn positive until late fiscal 2028, after more than a decade of negative cash flow.

Furthermore, the bank's revised forecasts imply a free-cash-flow-based return on invested capital (ROIC) of 10.7% by 2030. This figure only modestly exceeds the company's assumed weighted average cost of capital (WACC) of 8.3%, suggesting that DocMorris may continue to create limited economic value for investors over the medium term, according to the note.