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Wed, April 5 at 4:00PM ET

Clover Health Stock is Cheap, but Still Doesn’t Offer Good Value

  • Clover Health (CLOV) is generating interest after reporting stronger-than-expected revenue.
  • Yet the company is still not profitable and will not be for some time.
  • Investors can find better speculative investments than CLOV stock.
Clover Health logo on a phone screen in front of a computer screen showing a map where their services reach. CLOV stock.
Source: Wirestock Creators / Shutterstock

Clover Health (NASDAQ:CLOV) generated positive headlines after reporting better-than-expected revenue. However, after its recent double-digit pop, CLOV stock is still down over 90% from its 52-week high. Having the stock price this low may draw the attention of speculative investors who still want to believe in the stock which was one of the darlings of the meme stock movement.

But this one of those times where price is what you pay for something, and value is what that something is worth. And in this case, the price of CLOV stock still may not align with the underlying value in the stock.

CLOV Clover Health $2.77

Revenue is Increasing

The bullish case for Clover Health is being built on strong revenue growth. In the company’s last earnings report in early May, its revenue was 11% higher than expectations. The company delivered $874.38 million in revenue as opposed to the $787.41 that analysts expected. The company also announced that it was still expecting to have over $3 billion in revenue for the year. This would be in line with expectations.

And, the company also saw strong year-over-year growth in the number of accounts under management. Clover Health now is reaching approximately 257,000 accounts. That’s up from 66,000 in the prior year.

Clover Health Won’t Be Profitable Anytime Soon

Clover Health is not expected to turn a profit for several years. By itself, the fact that the company won’t be profitable until 2024 at least isn’t disqualifying. But it’s concerning that the company is expected to grow revenue significantly in the next five years but is still not expected to have positive earnings. And simply based on the current market conditions, that’s unlikely to move the stock much higher.

For its part, the company is suggesting that it may have underestimated the obstacles it faced in getting its Clover Assistant adopted. Specifically, doctors don’t care for enough Clover Medicare Advantage members to justify investing in the company’s technology. As I wrote in December: “Fee-for-service Medicare has its own challenges, but with Medicare Advantage those challenges are larger. And, for that reason, many physicians stay far afield from those patients.”

There are Better Options Than CLOV Stock

I know that CLOV stock looks tempting. If you’re looking for a place to deploy the cash you have on the sideline, you could buy a lot of shares and improve the reward for your risk. However, despite its recent rally, the stock is still underperforming the broader market in 2022. And analyst sentiment is turning bearish. In December, analysts gave the stock a price target of over $9. Today, the mean price target is $4.20.

I know that’s still about a 50% increase from its current level. But investors don’t need to chase CLOV stock at this level. My advice would be to keep it on your watchlist. And if it starts to move, you’ll have time to catch it on the way up.

On the date of publication, Chris Markoch 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.

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Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/clov-stock-cheap-but-still-not-good-value/.

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