Investing in a Medicare Advantage insurer may not sound very exciting. Unless that insurer is Clover Health (NASDAQ:CLOV). CLOV stock has experienced some big swings so far this year, which many suspect is a result of the Reddit trading crowd. But investors who take a closer look at Clover Health’s financials will find there’s more to this company than its meme-stock status.
Most people become eligible for Medicare at age 65. According to the Urban Institute, the number of Americans 65 and older is set to double between 2020 and 2040, eventually hitting 80 million. Medicare coverage is notoriously tricky to navigate, so Clover Health fills an important need in an aging population.
CLOV stock is surprisingly cheap as the company continues to expand its presence. I believe an investment today could yield healthy returns down the line. If you’re on the fence, a look at the company’s recent fiscal stats ought to convince you.
A Closer Look at CLOV Stock
So, was CLOV stock the target of a short squeeze earlier this year? It’s certainly possible.
CLOV stock has all the hallmarks of a Reddit target: low share price, relatively low trading volume (prior to the squeeze), and no logical explanation as to why the stock rallied from below $8 to a high of nearly $29 in early June.
The problem with Reddit-fueled run-ups is that they don’t tend to last long. CLOV stock quickly sank back and is trading below $8 again.
But purchasing shares in the $7 to $8 range could turn out to be a savvy move. As we’ll see, Clover Health is growing its business quickly and delivering strong results.
Clover Health Expanding Its Provider Network
Clover Health describes itself as “a technology company committed to improving health equity for America’s underserved seniors.” Its goal is to use data-driven primary care to reduce medical costs, particularly for “seniors who have historically lacked access to affordable high-quality healthcare.”
The company offers Medicare Advantage healthcare plans in nine states: Alabama, Arizona, Georgia, Mississippi, New Jersey, Pennsylvania, South Carolina, Tennessee and Texas.
Last week, Clover Health announced it scaled up its provider network in Georgia, adding dozens of hospitals, health systems and provider partners. In doing so, it expanded its Medicare Advantage PPO network in the state by roughly 5,000 primary-care physicians and specialists. This brings the number of in-network providers in the state to almost 15,000.
This sort of expansion is a win-win for Clover and its customers. The company’s Medicare Advantage plans often allow members to continue seeing their existing primary-care physician rather than having to switch to a new one. “With our wide network we strive to empower members to see the physician they choose and trust, whereas HMOs tend to dictate that choice through narrow networks,” said Clover Health President Andrew Toy.
Clover Health More Than Doubles Revenue, Customers
It appears Clover Health’s out-of-the-box approach to facilitating healthcare coverage is yielding good financial results.
The company reported its third-quarter results on Nov. 8. Clover Health generated $427.2 million in total revenue, up a whopping 153% from the same quarter a year ago. This was above estimates, with analysts calling for revenue of $417.8 million.
It also more than doubled the number of “lives under management” from a year ago. Clover Health ended the third quarter with about 129,100 customers, 125% higher year over year. And it expects to increase that number to more than 200,000 in 2022.
Importantly, Clover Health saw an 850-basis-point improvement in its medical care ratio compared with the second quarter. The MCR, which is the amount the company pays out versus the premiums it collects, fell from 111% in Q2 to 102.5% in Q3.
Finally, it appears that Clover Health is in a solid capital position, with cash, cash equivalents and investments valued at $588.7 million as of Sept. 30.
The Bottom Line on CLOV Stock
CLOV stock is down nearly 6% since reporting its third-quarter results. It seems the market doesn’t yet appreciate Clover Health’s role in the American healthcare system.
While Wall Street may not care much about helping people get access to affordable healthcare, it shouldn’t overlook the company’s ability to generate revenue.
There is a clear opportunity here with CLOV stock. It shouldn’t need the Reddit crowd’s help to rally again in the near future.
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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.