You might not think that a next-generation Medicare Advantage insurer like Clover Health (NASDAQ:CLOV) could be at the center of controversy and contention. Yet, CLOV stock is a heavily traded – and hotly debated – stock in 2021.
Here’s a recent snippet to give you an idea of what I’m talking about:
“This is a high shorted stock, so u will read a lot of BS bearish articles today trying to force you to sell at cheap prices. Read the company earnings, before making any decision,” enjoined trader Antonio Costa.
Midday on Aug. 12, CLOV stock was flying high, up 12% and trending on social media. It since has retreated to pretty much the same levels it has seen all month. It trades today at around $8.20.
We’ll dish the dirt and delve into the details today – and at the very least, I promise not to serve up a “BS bearish article” on Clover Health.
A Closer Look at CLOV Stock
InvestorPlace contributor Faizan Farooque recently suggested that trading Clover Health shares is a good way to benefit from meme stock mania.
Farooque has a valid point there. He pointed out the high short interest in CLOV stock, and indicated that another squeeze could be around the corner.
It would be difficult to prove or disprove that Reddit users were responsible for the astonishing rally that took place in June (we’re talking about a run-up from $8 to $28 in a matter of days), but it’s certainly possible that this was an instance of a social-media-fueled short squeeze.
It’s not easy to predict if and when the next Reddit rally will happen. Nevertheless, another price spike in CLOV stock could happen at any given moment, so I definitely don’t recommend taking a short position.
Check the Revenue Run Rate
The big move to the upside in CLOV stock was, more likely than not, attributable to Clover Health’s impressive second-quarter 2021 fiscal results.
Here are the highlights for the quarter, for your perusal:
- Total revenues $412 million, up 140% on a year-over-year basis
- Lives under Clover Management nearly doubled compared to 2021’s first quarter, to approximately 129,000; that’s an increase of 126.3% compared to the number recorded from June 30, 2020
- Clover Assistant was on track to manage more than $1 billion of annualized revenues
- The company is on a $1.6 billion annual revenue run rate, based on the second-quarter results
- Cash, cash equivalents and investments totaled $630.3 million as of June 30, 2021
Some folks will be tempted to focus on the 140% revenue increase, which admittedly is a show stopper.
It’s likely that was where the initial enthusiasm came from. The thing is, just as meme enthusiasm can drive a stock up, meme worries can make people cautious.
At the same time, let’s not dismiss the projected revenue run rate, which suggests continued financial health for Clover Health.
A Notable Assistant
While it’s not the only reason for his company’s outstanding quarter, Clover Health President and CTO Andrew Toy made sure to emphasize the importance of what’s known as the Clover Assistant.
Farooque concisely described this product as Clover Health’s web-based platform used by physicians to manage and analyze patient data.
As Toy explained, “The Clover Assistant has approximately 95,000 lives under management and is on pace to manage over $1 billion of annualized revenue.”
So clearly, this product is at the center of the company’s business model and will continue to provide a significant revenue source.
That’s not the only benefit, though. Toy also accentuated the potential health-related benefits of his company’s product, saying, “Most importantly, we believe the Clover Assistant drives better outcomes for our members.”
The Bottom Line
The controversy will undoubtedly continue as CLOV stock is a fast mover, and for all we know, another Reddit-propelled rally could be in the works.
However, that’s not the full story here. Clover Health is on solid financial footing, and the data proves this.
Just as importantly, the company is helping to provide better outcomes for patients. Hence, despite the heated debate, investors can feel good about taking a position in Clover Health.
On the date of publication, David Moadel 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.
