While medicare provider Clover Health (CLOV) seems optimistic about its prospects, Street analysts expect its revenue to decline in the coming quarters. So, should you Buy, Sell or Hold the stock now? Keep reading.
Clover Health Investments, Corp. (CLOV) has faced numerous lawsuits in recent years. However, as of June 2023, the corporation has established an agreement to resolve seven pending derivative lawsuits in Delaware, New York, and Tennessee courts. Furthermore, the company has now reached settlements for all of the outstanding civil litigation that was filed following its de-SPAC transaction.
In terms of financial performance during its last fiscal quarter, Clover Health posted revenues of $513.60 million while its net loss stood at $28.80 million. Meanwhile, its Insurance MCR saw an enhancement of over 1,400 basis points, and its Non-Insurance MCR experienced more than 600 basis points improvement.
Scott Leffler, CFO of Clover Health, expressed optimism about the company’s future. “We are excited about our improved outlook for 2023, the favorable impact on our liquidity position, and are also increasingly confident in the Company’s potential to deliver profitability on an Adjusted EBITDA basis for full year 2024 without the necessity of raising additional capital,” said Leffler.
Conversely, Wall Street analysts don’t anticipate that the company will secure profitability soon. Moreover, the consensus estimate suggests revenue will decline during the current and the following quarter. Therefore, I recommend potential investors wait for a more suitable entry point. A comprehensive evaluation of various metrics provides a more well-rounded understanding of the prevailing situation.
Analyzing CLOV’s Financial Performance: A Key Metrics Overview from 2020 to 2023
The trailing-12-month net income of CLOV has demonstrated a considerable downward trend with several fluctuations from September 2020 to June 2023, as follows:
- On September 30, 2020, CLOV’s net income was -$10.01 million.
- There was a significant drop towards the end of the year, contributing to a net income of -$136.39 million by December 31, 2020.
- The negative trend continued through the first half of 2021, as shown by values of -$184.80 million in March, -$502.36 million in June, and reaching -$526.94 million by the end of September.
- 2022 saw continued fluctuations with high negative measures of -$587.75 million in December of 2021, decreasing to -$401.22 million by June of 2022 but spiking again to -$442.00 million in September.
- The final data set indicates a slight improvement in CLOV’s financial condition, highlighting reduced losses in net income leading to -$338.84 million as of December 31, 2022, and further decreasing to -$260.77 million as of June 30, 2023.
In broad strokes, CLOV experienced quite a steep dive into negative territory across this time frame. Calculating the growth rate by comparing the final figure from June 2023 (-$260.77 million) to the initial figure from September 2020 (-$10.01 million), there is a significant increase in losses, showing a negative growth over this period.
The trailing-12-month revenue trend of CLOV exhibits an overall ascending pattern over time, with fluctuations observed mainly in the later periods.
- On September 30, 2020, revenue of $506.65 million was recorded for CLOV.
- The figure dramatically rose to $2.14 billion by March 31, 2022, indicating a significant growth rate.
- A further surge was observed by June 30, 2022, when revenue peaked at $2.58 billion.
- After reaching this high, the revenue experienced a decline by September 30, 2022, to $3.00 billion, and continued to plummet to $2.79 billion by June 30, 2023. Despite the mentioned fluctuations, CLOV managed to maintain its revenue above the $2 billion threshold toward the end of the series data.
- The most recent value on record, dated June 30, 2023, is $2.79 billion. This value indicates a substantial increase from the initial record of $506.65 million, showing an indication of a notable growth rate through the series line.
Focus on the latter part of the timeline shows a reversed trend, from a previous increasing pattern to a decreasing one, particularly from September 2022 onwards. This points toward a new phase for CLOV’s revenue transition that awaits to be either sustained or reverted back to an increasing plot in the future. This series ends with a noteworthy value of $2.79 billion for June 2023 after a period of decline.
The data series presents the Gross Margin of CLOV, from September 30, 2020, to June 30, 2023. Key observations:
- The Gross Margin started at 22.20% on September 30, 2020, but it observed a consistent decline until December 31, 2021, when it reached a low of -12.90%.
- After hitting this bottom, the Gross Margin gradually rebounded and reached a value of 1.00% by September 30, 2022.
- CLOV continued to experience favorable growth in its Gross Margin, increasing to 7.20% on June 30, 2023. This data indicates significant year-on-year fluctuations in the company’s Gross Margin between 2020 to 2023.
The notable trend is a period of decline followed by a slow recovery. In terms of growth rate, measured from the initial value to the last value, there is a noticeable decrease from 22.20% to 7.20%, indicating a relative Gross Margin drop of approximately 15% over nearly three years. Emphasizing more recent data, particularly the latest value as of June 30, 2023, there is a clear trend of recovery, with the Gross Margin standing at 7.20%. This underlines CLOV’s improvement after a challenging financial period.
The Current Ratio of CLOV has fluctuated over the observed time series, with a general downtrend from the third quarter of 2020 to the third quarter of 2023. Here are key observations:
- Starting at 1.36 in September 2020, there was an immediate decline in the same month to 0.328.
- By December 2020, a slight recovery was noted, taking it up to 1.156.
- The peak of this trend was reached at the end of the first quarter of 2021 when the Current Ratio of CLOV dramatically surged to 4.678.
- Following this peak, it fell over consecutive quarters to 3.664 in June 2021, 2.429 by September 2021, and then moderately stabilizing at this level.
- The downward trend resumed in December 2021, where the value stood at 2.02, falling further to 1.158 by March 2022.
- A relative plateau between the second quarter of 2022 to the second quarter of 2023 is noticeable, oscillating slightly between 1.164 and 1.244, with a minor peak at 1.418 in December 2022.
- As of the latest data point in June 2023, it stands at 1.244, representing a decrease of approximately 9% from its initial value in September 2020.
Generally, the dataset implies that the current ratio situation of CLOV has been largely erratic, with a promising start followed by an unstable period of ups and downs.
Examining CLOV’s Share Price Volatility and Subsequent Late Surge in 2023
The data presented describes the share price trend for CLOV from February 24, 2023, to August 16, 2023. From the data provided, a clearer understanding can be derived of CLOV’s pricing trend and growth rate over this period.
- On February 24, 2023, the share price stood at $1.10.
- There was a slight rise in the following month, with a peak of $1.17 on March 3, after which a negative trend ensued.
- From the beginning of March until the end of April 2023, there was a consistent decrease in share price, which reached its lowest point on April 28, 2023, at a value of $0.74.
- May 2023 observed a recovery trend, peaking on May 26 at $1.00. This, however, was followed by another dip in the first week of June 2023, bringing the price down to $0.86.
- June showed an unstable pattern, with prices fluctuating both upwards and downwards.
- By mid-July 2023, an upward trend began, reaching $1.11 on July 21, 2023. The growth accelerated further in August, ending at a peak of $1.41 on August 16, 2023.
Overall, the price of CLOV shares showed considerable fluctuations over this period. Still, eventually, an upward trend emerged from mid-July to August 2023, implying that the growth rate of CLOV experienced a late surge during this time. Here is a chart of CLOV’s price over the past 180 days.
Analyzing CLOV’s POWR Ratings: Quality, Growth, and Value
CLOV has an overall C rating, translating to a Neutral in our POWR Ratings system. It is ranked #8 out of the 12 stocks in the Medical – Health Insurance category.
The POWR grade of CLOV has consistently been of grade C from February 2023 to the latest available data in August 2023. Here’s a summary of the ranking and date pairings for the given data:
- On February 18, 2023, the ranking was 11.
- On February 25, 2023, the ranking remained at 11.
- In March 2023, the ranking improved slightly, starting at ten on March 4 and moving up to 9 by March 11. However, the POWR grade dropped to D during this same month.
- From April 1, 2023, to April 22, 2023, the POWR grade for CLOV remained at D.
- From April 29, 2023, to the beginning of August 2023, the POWR Grade alternated between C and D, with the ensuing weeks often maintaining the same grade as the prior week.
- From mid-June 2023, the POWR grade stabilized back at C.
- The ranking in the category remained steady at position ten throughout the entire period from April 8, 2023, to August 9, 2023—indicating a stable, but not top-tier, placing in this category.
Therefore, as of the most recent data on August 9, 2023, CLOV has a POWR grade of C and ranks #8.
Based on the POWR Ratings for CLOV, the three most noteworthy dimensions are Quality, Growth, and Value.
- Quality: This dimension consistently grew over time and eventually had the highest rating. Starting at 54 in February 2023, it decreased slightly to 48 in March 2023 but then increased consistently. By June 2023, the Quality rating had reached a high of 69 and maintained this through August 2023.
- Growth: The point system indicates an upward trend during the initial months. In February 2023, the score was 48; by March, it rose to 61. Despite minor fluctuations, the Growth rating stayed above 57 through August 2023.
- Value: The Value rating showed slight fluctuations over the months but remained generally strong. It started at 45 in February 2023, peaked at 57 in April 2023, and then zigzagged around the mid-50s mark until August 2023.
These findings suggest that CLOV’s Quality remains its strongest point according to the POWR Ratings while also showing significant potential when it comes to Value and Growth aspects.
How does Clover Health Investments, Corp. (CLOV) Stack Up Against its Peers?
Other stocks in the Medical – Health Insurance sector that may be worth considering are Humana Inc. (HUM), Elevance Health (ELV), and Centene Corporation (CNC) — they have better POWR Ratings.
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CLOV shares were unchanged in premarket trading Thursday. Year-to-date, CLOV has gained 51.69%, versus a 15.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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