WebMD Health CorporationWBMD

Morningstar Rating

Stock Research and Analysis

by Larry Witt, CFA

WebMD has become the most popular online destination for health-related content. Although we believe certain long-term trends favor its business model, many risks remain.

The company's most popular Web site is WebMD.com, which allows consumers to obtain Read more

Bulls Say

WebMD stands to benefit from demographic and business trends, including more demand for health-care-related information and, in response, the direction of more advertising dollars to the Internet.

The private portal business provides recurring revenue and higher switching costs, providing some stability for WebMD.

The Medscape site, which targets medical professionals, mitigates the firm's dependence on consumers. Read more

Bears Say

Increased FDA regulation of direct-to-consumer pharmaceutical advertising is possible in the post-Vioxx environment. This could strain growth, as it represents a large portion of WebMD's revenue.

Although WebMD has a head start on its competitors, we believe the public portal business has low structural barriers to entry and low customer switching costs.

The same trends that make WebMD's business attractive are likely to attract more competition. Revolution Health is a prime example.

Microsoft and Google have entered the online health-care industry in recent quarters. Both of these companies have ample resources and strong brands. Read more

Strategy

WebMD's business model is primarily advertisement-driven. Therefore, the company is focused on driving traffic to the site, providing relevant content, and prompting return visits with free newsletters Read more

Management

President and CEO Wayne Gattinella has served as president of WebMD since 2001; before that, he was chief marketing officer for PeoplePC. Chairman Martin Wygod is also chairman of HLTH, WebMD's parent company. HLTH's control of 96% of WebMD's voting Read more

Profile

WebMD has three primary business lines: It runs specialized Web sites that provide health information to consumers and health-care professionals; it publishes books and Read more

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