Clover Health Investments (NASDAQ:CLOV) is has-been stock and downright sickly looking by some measures and metrics. But is it premature to be reading last rites for CLOV stock?
Let’s take a look at what’s happening off and on CLOV’s price chart, then offer a risk-adjusted determination aligned with those findings.
Meme stocks. They’ve truly become a topic of conversation on Wall Street this year courtesy of hashtag slinging mentions, social media bluster and the likes on Reddit’s r/WallStreetBets and other bullish ape hangouts.
From heavily-shorted stocks faced with financial insolvency, the short-squeezes engineered by Reddit and its offspring ultimately provided the opportunity for GME and AMC to come off life support and potentially pivot their businesses into successful Version 2.0 ventures.
CLOV Stock and Reddit
Stay tuned in GME and AMC stock I suppose. But most of Reddit’s other scheming has been in vain for longer-term shareholders.
Exhibits like Meta Materials (NASDAQ:MMAT), Sundial Growers (NASDAQ:SNDL), Newegg Commerce (NASDAQ:NEGG) and many, many other meme stocks have provided nothing more than a flash in the pan rally or two followed by painful retreats into the lower right corner of investors’ trading screens.
And in more than one way it’s fair to count Clover Health’s CLOV stock as part of that ignominious group.
For a very brief moment this summer CLOV stock rallied with the best (or worst) of them. Shares of the next-gen Medicare provider surged nearly 350% on the back of Reddit & Co. squeezing Clover’s heavy bearish short interest.
As well and with CLOV now hitting new lows, Clover has a bit more in common with the many forgotten meme stocks of days past.
Still and opportunistically, is Clover rightfully different than most of its mostly laughable peers? Today, I wouldn’t be too quick to think that’s the case.
Making the poorly managed, costly and inequitable Medicare Advantage system a more productive and fair market for providers and its recipients vis-à-vis the Clover Assistant platform is a productive mission to say the least. I’m on board for that.
But the business’ advancement hasn’t been without its share of mounting costs for CLOV. And this past quarter’s ballooning red ink as the outfit looks to grow its business confirms as much.
Sales of more than $427 million grew by more than 150% compared to the prior year’s third quarter. But the growth is on the back of sales tactics like higher reimbursements and generous payouts. It’s unsustainable.
Free cash flow this past quarter was pounded by nearly 180%. At the same time, losses of nearly $150 million this past quarter and a cash position of less than $450 million stress something has to give. And I’m not on board with that or with today’s CLOV stock price chart.
CLOV Stock Weekly Price Chart
Source: Charts by TradingView
Reddit has all but thrown in the towel on Clover Health based on its lack of notorious chatroom chatter. And today, with CLOV stock trading narrowly beneath $5 a share, other bullish supporters may be compelled to exit by mandated charter or simply tax loss harvesting.
The good news, if any, is that reading CLOV’s last rites may be somewhat premature. But the hard truth is the stock shows little indication of being a good purchase as we enter the final calendar month of 2021. And in fact, the shares appear quite bearish.
Technically, CLOV stock is in a bearish momentum pattern with the weekly price action trading outside of a pinched and now expanding Bollinger Band formation.
And bottom line, with stochastics also showing one foot in the grave, there’s nothing to suggest CLOV’s bulls are anywhere to breathing more easily and if ever.
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.