Doximity Is Preparing To Report Another Strong Quarter

Key arguments supporting the idea

• Doximity is a leader in the rapidly growing telemedicine industry.
• The results for Q3 FY2025 may once again impress investors due to the use
of AI tools.
• Maintaining high growth rates of financial indicators and a strong balance
sheet in the medium term.

Doximity is the owner of the largest medical social network in the U.S, bearing the
same name. Founded in 2010, the company has become something like "LinkedIn
for doctors," providing the medical community with tools for professional
communication, telemedicine, exchanging clinical information, and finding career
opportunities. The platform covers over 90% of U.S. doctors, offering access to
more than 100,000 current job openings for medical professionals.

Investment Thesis

Telemedicine is one of the fastest-growing industries, with an annual growth rate
of 24% expected from 2022 to 2032, according to Grand View Research. Unlike
other public companies in the telemedicine field, such as Teladoc (TDOC), GoodRx
(GDRX), and Amwell (AMWL), Doximity is the only profitable company. One of
Doximity's key advantages is its ability to generate revenue not only from
telemedicine services but also from targeted advertising and marketing solutions
aimed at medical professionals, which allows the company to effectively compete
in the market. According to the Doximity’s investor presentation, company
estimates the total market for telemedicine, pharmaceutical marketing, and
healthcare recruitment at $18.5 billion, highlighting significant opportunities for
growth and expansion.

The results for Q3 FY2025 may once again impress investors with revenue and
EPS growth driven by AI solutions. The number of major clients generating over
500k annually increased from 92 to 103 as of Q2 FY2025, and these clients
account for approximately 83% of the company's total revenue. The company has
a good chance of repeating the dynamics of previous quarters due to AI solutions
that increase customer engagement and improve targeted advertising. The
company reported that over one million requests were made to Doximity GPT in
Q2 FY2025. The increase in user engagement, supported by tools like Newsfeed
and Client Portal, significantly improves user loyalty and increases the value of
advertising opportunities for pharmaceutical companies. Today over 600,000
doctors actively use Doximity tools for their daily tasks. For Q3 FY2025, the
company expects 13% YoY revenue growth and 15% YoY EPS growth.

Maintaining high growth rates of financial indicators and a strong balance
sheet. Over the past 5 years, the revenue CAGR has been 32%, and net income has
increased more than 14-fold. The company has a strong balance sheet with $800
million in cash and debt of $13 million, with a current ratio of 7.2. Additionally, by
the end of Q2 FY2025, the gross margin, adjusted EBITDA, and net margin reached
record levels, at 90%, 53%, and 32%, respectively. According to the FactSet
consensus, double-digit growth rates are expected to continue over the next three
years, with forecasted revenue growth of 13.6% and adjusted EPS growth of 21.3%
in FY2025.

We maintain a Buy rating on DOCS stock with a price target of $66. A stop-loss
order is recommended at $45.