What is going on with Clover Health (NASDAQ:CLOV)? In 2021, Chamath Palihapitiya helped take the healthcare insurance company public via a special purpose acquisition company (SPAC). During the year, shares of CLOV stock even rocketed to as high as $28. Now, though, shares are trading at record lows in the $3 range, down some 15% year-t0-date (YTD).
The reason for Clover’s decline this week may be attributable to Humana (NYSE:HUM). Yesterday, Humana reported that it had cut its 2022 forecast for new Medicare Advantage members by roughly 50%.
Medicare Advantage health plans are a primary driver for Humana’s core business. Humana had previously forecasted an additional 325,000 to 375,000 new members during 2022. Now, that forecast has been split in half to 150,000 to 200,000 new members. The company stated that the main reason for the lower forecast is “higher than anticipated terminations” during the healthcare insurance election period. HUM stock fell by as much as 21% after the news, representing its largest intraday loss in 13 years.
As a result, investors are concerned that this lower forecast may directly affect CLOV stock. This is because a majority of policyholders covered by Clover use the Medicare Advantage plan.
On top of this, Credit Suisse also lowered its price target for CLOV stock today to $3.50. Analyst Jonathan Yong cites potential interest rate hikes and a need to raise capital as reasons for his price reduction. Yong added that investors should instead invest in companies with “clear earnings power, a sustainable and workable business model, and a cash generating business.”
CLOV Stock: 4 Things to Know as Shares Plummet
- Shareholders of Clover may be concerned about share dilution. Last November, the healthcare company completed a public offering of Class A common stock that brought in roughly $300 million in gross proceeds. InvestorPlace contributor Joseph Nograles notes that the offering increased the share count by 12.4%, equating to an 11% drop to future earnings per share (EPS).
- Clover reported revenue of $427.2 million during the third quarter, up 153% year-over-year (YOY). Based on trailing twelve-month (TTM) sales, CLOV stock now trades at a scant price-sales (P/S) ratio of 1.3.
- For the period, the number of lives covered by Clover increased by 125% YOY to 129,100 during Q3. Of the 129,100 lives covered, more than 67,000 members used the Medicare Advantage plan.
- Clover forecasts that it will have an average of 82,000 members on the Medicare Advantage plan for 2022. This will represent a YOY increase of over 20%. Unlike Humana, Clover has not lowered its forecasted Medicare Advantage member count for 2022.
On the date of publication, Eddie Pan did not hold (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.
