WebMD Is Quickly Becoming A Wall Street Favorite

• In the past week, WebMD Health Corp. WBMD gained 5.4 percent in the last five trading sessions.
• Charles Rhyee of Cowan and Company upgraded WebMD to Outperform and hiked its price target to $53 from $42 prior.
• Rhyee said that WebMD is poised to transform into a "broader healthcare service platform," something that investors "have yet to fully appreciate."

At present, Cowan and Company's Charles Rhyee said that WebMD's core advertising business is the primary driver of stock performance – but it shouldn't be. Instead, WebMD has a "big opportunity" to position itself as a platform for healthcare services, much in the same way that CVS Health Corp CVS pivoted to a strong healthcare focus. This move follows a similar upgrade by SunTrust Robinson Humphey in early August.

Cowan and Company said that WebMD has the opportunity to grow digital health services by upward of $100 million – a huge new revenue opportunity for the company with just $630 million in expected revenues this year. "Investors have yet to fully appreciate" this opportunity, Rhyee added, particularly "given results haven't shown their full potential."

In the Q2 earnings report, Rhyee said that there was some indication that WebMD is benefiting from health reform-related demand "earlier than expected." That helped management to raise the low-end of its guidance higher, suggesting that it is confident in its ability to make numbers.

Rhyee said that the $53 price target is based on a five-year discounted cash flow analysis. WebMD gained 3.9 percent on the upgrade.