The Bottom Could Be Close for Clover Health Stock

CLOV stock - The Bottom Could Be Close for Clover Health Stock

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  • Year-to-date Clover Health (CLOV) stock is down 35% yet is near all-time lows.
    Chelsea Clinton bought CLOV stock at an average price of $2.53 per share.
    The company more than quadrupled its revenues year-over-year.

Late last week, the Fintech industry staged a major rally. Despite this, most stocks in the sister industry of insurance tech have not budged. This comes as a disappointment for owners of insurance tech stocks like Clover Health (NASDAQ:CLOV) stock.

Investors in the stock have been suffering for months on end seeing their holdings only retaining a fraction of their value. Year-to-date, CLOV stock is down 27%. This is an additional decline from the downtrend it experienced in 2021. Remember, at its peak last year, CLOV stock was trading at a high of $28.85.

The rally in fintech could be a sign of things to come through. There is a chance that the price action for CLOV stock is closer to the bottom than it is to the high. Just last week, CLOV stock made a rejection of its all-time low of just under $2, bouncing from the $2.13 area. That confirms this area is a support level.

CLOV Clover Health $2.76

Insiders Buy CLOV Stock

Another sign that the bottom could be near is insider buying in the company. Usually, when interpreting insider activity, buying tends to have a great amount of weight. This is because you would only buy a stock if you believe that it is going to increase in value.

For the last three months, insiders bought a total of 4.4 million shares of CLOV stock. The most prominent among the insiders who bought in is Chelsea Clinton, daughter of former president Bill Clinton. The Clintons have proven to be a pretty savvy family over the years, regardless of whatever you think of their leanings.

Chelsea is a board member of Clover Health making her a bona fide insider. She bought 100,000 company shares at an average price of $2.53 per share. The transaction happened around March. After a brief rally, CLOV stock is actually lower than the price Clinton paid.

Insiders are required to hold for extended periods (i.e. they can’t be short-term traders due to the disclosure requirements). Therefore this current price can still be considered “cheap” by an insider. And another factor supporting this thesis is Clover Health’s significantly improving quarterly results.

First Quarter Results Are Good for Clover Health

Clover Health recently released its Q1 2022 earnings results. These came out better than expected especially on the revenue side. The company’s Q1 2022 revenue was more than quadrupled from what it was a year ago at $874.4 million compared to $200.3 million in 2021. This means that the company is doing well in achieving the scaling it desperately needs.

The company expects revenues for the full year to be between $3 billion and $3.4 billion. This is broken down to insurance revenue of $1 billion to $1.1 billion and non-insurance revenue of $2 billion to $2.3 billion. The non-insurance segment is made up primarily of the direct contracting segments. This is the non-Medicare-advantage portion of the company’s business.

Your Takeaway on CLOV Stock

The company expects its non-Medicare business to consist of two-thirds of its 2022 revenue. In other words, Clover Health seems to be finally reaping the rewards of its tech stack.

Remember, what differentiates Clover Health from your run-of-the-mill insurance companies is its reliance on tech to drive better outcomes. In the past this thesis has not exactly played out. However as the company begins to scale its revenue, it can be seen to be playing a larger and larger role.

CLOV stock remains inherently risky. There is no doubt about that. However given the strong results, I would not be surprised to see CLOV stock begin the bottoming out process. The strong results and the recent insider transactions seem to form a story of a stock that many believe could be undervalued.

CLOV stock could for sure drop another 20-30% depending on the mood of the market on a particular day. However, at this price point, the risk to reward may be worth it.

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On the date of publication, Joseph Nograles 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.

Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.


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