Down -25.82% in 4 Weeks, Here's Why Clover Health Investments (CLOV) Looks Ripe for a Turnaround

A downtrend has been apparent in Clover Health Investments, Corp. (CLOV) lately. While the stock has lost 23.1% over the past week, it could witness a trend reversal as a hammer chart pattern was formed in its last trading session. This could mean that the bulls have been able to counteract the bears to help the stock find support.

While the formation of a hammer pattern is a technical indication of nearing a bottom with potential exhaustion of selling pressure, rising optimism among Wall Street analysts about the future earnings of this company is a solid fundamental factor that enhances the prospects of a trend reversal for the stock.

Clover Health Investments, Corp. CLOV delivered a loss per share of 2 cents in the third quarter of 2024, narrower than the year-ago period’s loss of 7 cents per share and the Zacks Consensus Estimate of a loss of 3 cents per share.

CLOV’s Revenues in Detail

Clover Health registered revenues of $330.9 million in the third quarter, up 8.2% year over year. However, the figure missed the Zacks Consensus Estimate by 4.8%.

The top line was aided by robust Insurance revenues and Other income.

Shares of this company plunged nearly 12.7% in yesterday’s after-hours trading.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Clover Health’s Segmental Details

Clover Health derives its revenues from two business sources — Insurance and Other income.

Insurance revenues in the third quarter totaled $322.6 million, indicating an uptick of 7.1% year over year. Per management, this was primarily driven by strong member retention and continued intra-year growth.

Within CLOV’s Insurance segment, the Insurance Benefits Expense Ratio (BER) was 82.8% in the third quarter of 2024, which contracted 50 basis points (bps) year over year. Insurance medical care ratios (MCR) was 78% in the third quarter of 2024, which also contracted 50 bps year over year.

Clover Health’s Insurance members were 81,110 as of Sept. 30, 2024, down 0.2% year over year.

Other income generated revenues of $8.4 million in the third quarter, implying an improvement of 75.2% year over year.

Clover Health Investments, Corp. Price, Consensus and EPS Surprise

Clover Health Investments, Corp. price-consensus-eps-surprise-chart | Clover Health Investments, Corp. Quote

CLOV’s Operational Update

In the quarter under review, Clover Health’s net medical claims incurred increased 5.9% year over year to $249.8 million. Salaries and benefits expenses decreased 9.2% year over year to $54.9 million, while general and administrative expenses declined 14.2% year over year to $35.2 million. Total adjusted operating expenses of $339.9 million increased 0.8% on a year-over-year basis.

Total adjusted operating loss in the third quarter was $8.9 million compared with the prior-year quarter’s adjusted operating loss of $31.4 million.

Clover Health’s Financial Position

Clover Health exited third-quarter 2024 with cash and cash equivalents and short-term investments of $289.7 million compared with $264.4 million at the end of the second quarter.

Cumulative net cash provided by operating activities from continuing operations at the end of third-quarter 2024 was $129.5 million compared with $79.4 million a year ago.

CLOV’s Guidance

Clover Health has revised its outlook for 2024.

For 2024, Insurance revenues are continued to be estimated in the range of $1.35 billion-$1.375 billion.

For 2024, Insurance MCR is now expected to be in the range of 76-77%, lowered from the previous outlook of 77-79%. Insurance BER is now expected to be in the range of 81-82%, narrowed from the previous outlook of 81-83%.

Our Take

Clover Health exited the third quarter of 2024 with a narrower-than-expected loss per share. The uptick in consolidated revenues and both segments’ revenues was encouraging. The contraction in the Insurance BER and MCR was promising as well.

On the flip side, lower-than-expected revenues and continued dismal bottom-line performance was disappointing. CLOV incurred adjusted operating loss during the quarter, which did not bode well either.

Clover Health’s Zacks Rank & Key Picks

CLOV currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, ResMed Inc. RMD and Boston Scientific Corporation BSX.

Quest Diagnostics, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2024 adjusted earnings per share (EPS) of $2.30, beating the Zacks Consensus Estimate by 1.8%. Revenues of $2.49 billion outpaced the consensus mark by 3.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has a long-term estimated growth rate of 6.5%. DGX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.4%.

ResMed reported first-quarter fiscal 2025 adjusted EPS of $2.20, beating the Zacks Consensus Estimate by 8.4%. Revenues of $1.22 billion surpassed the Zacks Consensus Estimate by 2.9%. It currently carries a Zacks Rank #2.

ResMed has a long-term estimated growth rate of 14.8%. RMD’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.4%.

Boston Scientific reported third-quarter 2024 adjusted EPS of 63 cents, beating the Zacks Consensus Estimate by 8.6%. Revenues of $4.21 billion surpassed the Zacks Consensus Estimate by 4.4%. It currently carries a Zacks Rank #2.

Boston Scientific has a long-term estimated growth rate of 13.8%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.3%.

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