Clover Health (NASDAQ:CLOV), the technology-focused healthcare company serving Medicare Advantage customers, is in the news due to several interesting catalysts. First, Clover Health Investments was added to Russell 3000 Index, effective June 27. Then, on July 14, the company said it launched its services in 13 new counties. However, CLOV stock still finds itself in a tough situation.
Clover Health has plenty of factors going in its favor right now. It’s not a profitable company yet. But it is seeing strong revenue growth and using technologies that can improve its services and lower operating costs. It’s easy to see that the company has been in controversy before.
And many investors are skeptical about dipping their toes in the current environment. Purchasing it now may not yield a quick dividend. But someone looking to buy the stock as a medium or long-term investment could potentially make a great return on their money.
CLOV Stock Will Benefit From Operating in a Growing Industry
Clover Health is a good investment for those interested in the Medicare market. It is a technology-driven health insurance company that happens to be one of the first to focus on the Medicare market. Clover Health uses data and analytics to drive clinical programs that improve member health and lower costs. The healthcare company also has a strong focus on preventive care.
Medicare Advantage is growing at a fast pace. In February 2022, 45% of all Medicare enrollments were from this insurance plan, up from 37% in 2019. The industry growth bodes well for the players involved. Although numerous companies are grappling for a more significant piece of the market, the growth in the Medicare Advantage space means it will be exciting new opportunities for everyone.
We can see that reflected in the latest numbers for CLOV. Clover Health saw a year-on-year jump in their Medicare Advantage enrollment by 25% in 2022. In addition, the company’s revenues have grown impressively this year.
In the first quarter of 2022, revenues stood at $874 million, a fourfold increase from $200 million sequentially. The numbers compliment last year’s numbers; revenues more than doubled in 2021 to $1.47 billion.
These are promising signs. But the net loss increased to $75.3 million from $48.4 million. The company needs to get profitable by lowering its operating costs. The increase in enrollments, which directly impacts revenues and profitability, will remain crucial.
The company is also using artificial intelligence tools that can help cut costs, offer better service to the clients, and help increase Clover’s performance.
Two Important Concerns to Keep In Mind
CLOV stock took off in June of 2021 as it became one of the most-discussed healthcare stocks on Reddit. However, now the stock price has fallen spectacularly and is not where it should be. But the company’s potential is encouraging since there’s still hope that it will succeed in the future.
However, a certain section of investors might want to stay away because of CLOV stock has the reputation of being a meme play. For those unfamiliar with the term, a meme stock is a security that has been inflated by social media hype. These stocks are often highly volatile, and Clover Health is no exception.
In the year thus far, the stock has lost more than 30% of its value. For investors who are looking for stability, Clover Health might not be a great choice. However, Clover Health could be a goldmine for those willing to stomach some volatility. Only time will tell.
In addition, Clover Health has had legal challenges that put it in a tough spot. One of the concerning areas is legal issues in the past. Clover Health was investigated by the Department of Justice and failed to disclose it at the time of going public in 2021. They minimized it instead or just not saying anything about this controversy.
In response to this, investors sued the company. And the SEC started an inquiry. In March 2022, a U.S. court ruled the executives should face the shareholders in court for failed disclosure of information on their time sheets.
The Bottom Line
Clover Health is a good stock to invest in because it is part of the growing healthcare sector. The healthcare sector is expected to continue to grow in the coming years as the population ages, and more people seek out medical care. Clover Health is a well-established company that provides its members with innovative health insurance products and services.
The one area where the company needs to do a bit of work is controlling costs. While the company has been growing its top line, costs have grown more quickly than expected. This is because of increased spending on research and development. Other than that, CLOV stock looks like an enticing investment.
On the publication date, Faizan Farooque 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.