Clover Health Investments (NASDAQ:CLOV) has an important mission. And it has the resources to make a difference to communities at large, other than one made up of apes. Let me explain, as well as what a more calculated investment in CLOV stock might look like.
CLOV stock. It’s a recent SPAC merger from well-known venture capitalist and early Facebook (NASDAQ:FB) exec Chamath Palihapitiya. He’s a person who knows a thing or two about bringing successful and diversified companies public. Think Virgin Galactic (NYSE:SPCE), Opendoor Technologies (NASDAQ:OPEN) or SoFi Finance (NASDAQ:SOFI). Then pull the curtain and you have Chamath’s Social Capital Hedosophia funds.
These days, however, Chamath’s Clover Health is run by 2021’s notorious Reddit crowd or the increasingly popular moniker WallStreetBets “apes.” And that community’s mission, as anyone with a passing interest in stocks knows, is about one thing only. Investing!!??
The apes’ business model is to juice stocks ridiculously higher out of small-cap oblivion. Or squeeze those companies whose shares sport heavy short interest into spectacular but short-lived rallies. Think Sundial Growers (NASDAQ:SNDL) or of course, GameStop (NYSE:GME) as two prime suspects of those types.
A Look at CLOV Stock
CLOV’s price spike earlier this month saw shares rally from around $7.75 to nearly $29 a share over a handful of sessions. The near 275% valuation jump enjoyed ape’s promoting Clover Health’s unconfirmed buzz of Russell 2000 inclusion. The apes’ chest-beating gain in CLOV stock also enjoyed the benefit of stiff short-interest upward of 35% to help their cause.
Once in a while though, there’s more than just short-lived monkey business in Reddit’s so-called meme stocks. The apes target a company with significant prospects which can make a truly large difference to other communities longer-term. CLOV stock may just be one such animal.
So who exactly are we talking about? I’m glad you asked.
What comes to mind when you think of the U.S. healthcare insurance market. Massive? Broken? Waste? Inaccessible? Misaligned incentives? CLOV’s mission is to fix those problems with its data aggregation tool, the Clover Assistant.
The Clover Assistant is an efficiency-boosting software platform for care and billing management. It utilizes machine learning to help healthcare professionals make better decisions of all kinds and enabling stronger outcomes for all parties involved.
Today, CLOV’s business is showing solid promise with 18% sales growth year-over-year. Is it profitable yet? Nope. Has it disappointed? In its last quarterly results red ink of 13 cents was 2 cents worse than forecast. So, yeah.
Also, a rising medical care ratio or MCR of 107.6% isn’t great news. In a nutshell, losses will continue until Clover pays less for its member’s medical procedures than it collects in exchange for coverage. I suppose that’s another box that’s currently checked favoring CLOV’s bear population.
Still, with a total addressable market estimated at nearly $600 billion within the next few years, Clover’s proven first-mover’s advantage in taking market share. And, appreciating the importance of a win-win inside a healthcare system in need of help, CLOV has the kind of stuff worth cheering for after the apes and bears have left the building – or not.
CLOV Stock Weekly Price Chart
Source: Charts by TradingView
The weekly chart of CLOV stock is yet another illustration this year of the power of bullish apes, trapped bears and its sickly aftermath. But Clover looks well-positioned for coming off life support.
Technically, shares have stabilized off the 76% retracement level. That support level is reinforced by the stock’s relative high set back in April, which was cleared as part of a huge price gap during this month’s explosive run-up in CLOV.
Overall, I’m bullish a meaningful low may be nearby. However, I’d suggest waiting for a weekly candlestick to confirm a bottom. Today, that would happen if shares trade through last week’s high of $15.10.
To increase the bullish pattern’s chance of success, requiring a bullish stochastics crossover would be advised. And if both conditions are met? In order to avoid emergency care in CLOV stock, electing insurance coverage in the form of a CLOV stock collar is always a terrific way to manage unnecessary risk.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.