Clover Health Investments Corp (NASDAQ: CLOV) has struggled over the past month, declining by 33%. Despite the recent decline, Clover is the fastest growing Medicare Advantage insurer in the United States. The company serves more than 66,300 members all in the United States. Clover Health stock initially caught the attention of investors after SPAC Billionaire Chamath Palihapitiya announced his intentions to make the company public via a reverse merger. Now trading as a public company, we will breakdown what investors need to know about Clover Health’s stock forecast for 2022.
Table of contents
What are analysts forecasting for CLOV stock in 2022?
Firstly, the general consensus amongst Wallstreet analysts is neutral with the average 12 month price target is $10.60 a share (28% downside). Here are recent price targets investors should know about:
JP Morgan & Chase 7/12/2021 – Analyst Lisa Gill downgraded CLOV’s 12 month price target to $9 a share with an Underperform rating. “We are downgrading shares of CLOV to Underweight from Neutral following 1Q21 results in which the company lowered most guidance metrics, including reducing the number of aligned beneficiaries under the direct contracting program in 2021 by 50%,” the bank’s analysts wrote.
Bank of America 6/10/2021 – Analyst Kevin Fischbeck downgraded the companies rating to a Underperform with a $10 price target after the release of the Q1 earnings.
Credit Suisse Group 5/19/2021 – Analyst Jailendra Singh lowered the price target on the stock to $9 valuation. The analyst noted to investors earlier this year that there is long term potential in the Medicare Advantage industry. However, broader market volatility in growth stocks coinciding with the concerns raised from Hindenburgs short seller report in February have caused volatility in the stock (according to TheFly report).
CitiGroup 5/18/2021 – Analyst Ralph Giacobbe lowered the firms price target from to $10 a share. CitiGroup maintained their Buy rating on the stock.
What this means for CLOV investors?
As we can see, the general sentiment across the board of analysts is conservative with 2 Sell ratings, 1 Hold and 1 Buy. With the average price target at $9.50 a share, there is only a slight 1.86% upside from the current trading price. The lower revenue guidance noted in Clover’s Q1 earnings has been a key driver in bearish sentiment across the board of analysts. If Clover can reiterate stronger guidance in the next few quarters we may see an increase in valuations.
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How is Clover financially performing in 2021?
Firstly, Clover Health performed strongly in regards to revenue in 2020. The company generated $673 million, a 46% YOY improvement. The revenue growth is a bi-product of its growing membership base, up 36% YOY. In the first quarter of this year, the company reported $200.3 Million in revenue, a 21% improvement YOY. Clover also reported a healthy cash position of $720.1 Million as a result of the merger.
However, the companies net loss widened by 261% YOY in Q1 which did impact the share price significantly. Clover initially predicted an annual EBITDA net loss between $150 Million – $190 Million for 2021, however in the most recent guidance the company expects this to possibly widen to $240 Million. Investors and institutions did not respond well to this notice, which was a factor in the downtrend of the stock.
“Our 2020 results demonstrate our ability to deliver revenue and membership growth, while improving management of the cost of care for our members and driving further operating leverage.”Clover Health’s CFO, Joe Wagner on Full Year results for 2020
Looking forward at Clovers revenue growth
The revenue outlook in 2021 according to analysts forecasts Clover to generate $819 Million. In comparison, the October 2020 investor presentation forecasted 2021 revenue to be closer to $880 Million. Nevertheless, the $819 Million forecast would represent a healthy YOY increase of 22%. Looking further ahead, the company expects to generate $1.21 Billion in Gross Revenue for 2022 and $1.7 Billion in 2023 (according to Clover’s Investor presentation). In addition, the company expects to have over 450,000 members by 2023.
The risks associated with Clover stock
There is no reward without the associated risk attached. This remains true for the high growth sector of the market. As we have seen over the past 4 months, the high growth sector (including merged SPAC companies) tend to carry high volatility. The recent downtrend of Clover Health stock has pushed the companies stock price below its PIPE offering price of $10. As discussed by analyst Jailendra Singh, the volatility of CLOV stock has left analysts neutral (for now) on the midterm performance of the company.
Summarising Clover’s stock forecast
In conclusion, the current trading price of Clover Health is on par with current analysts expectations. Furthermore, the revenue forecasts although reduced for 2021 still represent a 22% YOY growth if they hold true for the remainder of the year. However, the volatility of the stock has been ongoing and is definitely a factor in the midterm outlook of Clover stock. A widening net loss has impacted the share price so far in 2021. Therefore, all eyes will be on the Q2 earnings guidance to determine if the net loss can be improved. We will continue to update our viewers on Clovers performance as we move through 2021.
Written by Tyger Fitzpatrick, Founder of Youth Investment Group.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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