Is CLOV Stock a Solid Long Term Investment?
Clover Health stock (CLOV) has struggled in recent months. In June 2021, the stock reached a 52-week high of $28.85 per stock. The company, however, dropped off substantially, closing roughly $8 per stock in September mid-week. These kinds of dramatic fluctuations seem to be reflective of the market’s current speculative orientation. CLOV stock is still one of the most volatile in its peer group. This company’s individual market confidence remains extremely high, causing some unusually extreme fluctuations that other equities do not often experience. Investors still need to understand that CLOV stock isn’t a run-of-the-mill healthcare insurance firm, as most individuals in the United States are not qualified to use its services. Clover Health manages Medicare Advantage insurance plans supported by the federal government and available to qualified Medicare subscribers seeking health care coverage. Being new in such a heavily regulated market teeming with strong competition, Clover has a lot to prove. However, with its emphasis on digital technologies and a rising level of support from important stakeholders, it might have what’s necessary. Let’s have a closer look at Clover Health to see if its shares could be a solid long-term investment.
A Closer Look at CLOV Stock
Clover Health is a next-generation risk-taking company with the goal of achieving equity in health for all people in the United States. Although the purpose of this organization is to enhance everyone’s lives, it focuses mainly on the elderly, who have generally lacked access to inexpensive, high-quality health care services. Clover’s team is spread around the United States and comprises a team of world-class technicians stationed in China, with its company headquarters in Nashville, Tennessee. The organization manages Medicare enrollees’ treatment in eleven states across the United States. Clover Health established its direct contracting business in April 2021. Direct Contracting was introduced by the Centers for Medicare & Medicaid Services (CMS) as a new form of compensation methodology. The move to Direct Contracting was intended to encourage those providing healthcare services to move away from a payment model and toward a more value-based care model. Thanks to its AI-enabled Clover Assistant software, the company already has the edge over competitors in this scenario. However, CLOV stock has had all the criteria of a Reddit goal; low stock value and limited trading activity, yet no rational answer for why the stock soared from under $8 to roughly $28 in early June, as previously stated. Still, buying stock in the $7 to $8 level could prove to be a wise investment. Clover Assistant is the company’s primary differentiator. Conventional healthcare methods are constrained by variables such as obsolete technologies and increased capitalization. As more people are joined, a tech-centric strategy can help to reduce costs. Additional information will be collected as more physicians utilize the Clover Assistant, boosting the software’s predictive ability. This approach will eventually result in better, less expensive results.
Why Buying CLOV Stock Might Be a Smart Option
Clover Health stock is still one of the most popular among Reddit users. CLOV stock shareholders experienced significant volatility in August 2021, following the company’s presentation of Q2 results that exceeded expectations a few weeks prior. Here are some reasons why you should buy the company’s stock in the long-term.
1. Clover is Increasing its Product Offerings
Clover Health is on a mission to provide good healthcare accessible and inexpensive to all seniors, irrespective of health or financial status. The company started by enrolling in the Medicare Advantage program, which enrolls over 26M people and accounts for $343 billion in expenses. However, competition is strong. The typical Medicare recipient now has 33 choices to choose from, which is higher compared to the past years. Clover applied for the Direct Contracting system for regular Medicare in order to broaden its scope. As previously explained, it is a program developed by the CMS to provide high-quality healthcare at a reasonable cost. Medicare is a trillion-dollar market, and it is providing Clover with an excellent opportunity to develop. And in the most recent quarter, the company was able to more than double its lifespan. In June 2021, that figure was at 129K, with approximately 52% affiliated with the Medicare Advantage plan.
2. Clover is Including EHR Systems
As earlier mentioned, the company has integrated its Clover Assistant software into the Electronic Health Record (EHR) system. The EHR’s outpatient site stock price was expected to be as high as 6% in 2020 and lower as 3% in 2019. On the other hand, Clover’s software is employed in hospitals and physicians’ workplaces. During past conferences, the management had already mentioned EHR integration as a growth priority. Andrew Toy, the President and Chief Technology Officer at Clover Health, emphasized the company’s implementation of the Fast Healthcare Interoperability Resources (FHIR) standards in the latest financial report. It is a government-regulated standard for exchanging data among EHRs. The company reported in August 2021 that the Clover Assistant would be able to integrate with all FHIR-enabled EHRs, including cloud-based software solutions for acute and ambulatory care, Epic, and Cerner’s virtual monopoly. This approach will not guarantee success, but it is a crucial component.
3. Increasing Accessibility for Disadvantaged Groups
Clover Health has differentiated itself through addressing some of the challenges to the nation’s most disadvantaged communities. By the end of 2019, over 50% of the organization’s members were classified as a minority. This is significantly higher than the market average of 30%. The company also scored well on a model of the Medicare Advantage Health, Equity Summary Score, a new CMS software that assesses how well organizations deliver care to groups that are adversely impacted by socioeconomic risk factors. Clover has been pushing CMS to implement a rating method that considers these risk factors. If this occurs, the company’s quality score should increase, resulting in large quality benefits.
4. CLOV Stock Short Interest is Still High
Looking to invest in a highly shorted company may appear paradoxical. Heavy short interest could be a red flag indicating an unstable business model or unduly optimistic expectation of future financial success, which may not be realized. On the other hand, high shorting activity may indicate a chance for quick market gains if an increase in stock value forces bears to close their bets, resulting in a short squeeze. According to Yahoo Finance, approximately 25M CLOV shares have been shorted out of a float of 198 million, accounting for a significant 12% of the overall shares. CLOV stock is one of the most popular scoreboards among participants of the enormous buy-and-hold campaign that has prompted short squeezes predominantly on subreddits. And many CLOV stock investors think that the company has solid foundations that support long-term investment in the stock.
Things to Consider Before Buying CLOV Stock
Clover intends to challenge the Medicare Advantage program industry by lowering healthcare costs and providing better benefits for patients. Even though you don’t have a lot of healthcare insurance companies in your portfolio, CLOV stock could be worth checking. Clover Health, however, has a lot of working components to manage, so it’s crucial to know more details about the company before any long-term investment.
1. CLOV is a Meme Stock
CLOV is a stock that gained popularity on retail trading sites like Reddit, despite its long-term benefits. That implies the stock might be unstable on a regular basis, apparently for no reason. This also means that the organization can have access to a passionate group of advocates, which might be useful. However, don’t assume that CLOV stock is a bad investment because it’s a meme stock. Memes also provide free publicity and exposure. Although this may not make a big difference in the short term, it could be beneficial in the long-term. Suppose the company is particularly adept and aggressive in its retail investor interactions. In that case, there is also the prospect of employing individual investors as part-time advocates for legislative issues that might profit for the company, such as modifying Medicare qualifying age limits.
2. Taking Clover’s Value into Account
One of the allegations made at CLOV stock is that it has been wildly overvalued even since its inception. However, it has lost value following its combination with Chamath Palihapitiya’s SPAC. Consequently, its market metrics are much lower than the industry sector median. There is a significant difference between its pricing ratios as well as the sector median. Additionally, its average price goal is $12.70, which is almost 70% higher than its present price. Furthermore, even the most conservative predictions for the CLOV stock are larger than its present valuation. The company’s sales growth rates continue to impress investors regarding its performance. Yet, profitability seems to be a long way off, given how extensively it is investing in increasing its influence all over the nation. Thus, considering its growth potential, CLOV stock is a bargain.
3. Uncertainties May Arise from New Legislation
Clover operates in the heavily regulated Medicare Advantage (MA) program administration sector. Given Medicare is a government-provided health care insurance system, it stands to reason that the firm is subject to a significant level of legislative risk. The company would be doomed if Congress passed legislation prohibiting run by private companies expansions of Medicare services. However, this is uncertain, but even minor changes to the official legislation might significantly impact investors. But, some of these changes have the ability to be hugely beneficial. Furthermore, because millennials have lesser health concerns, they may be less expensive to cover, which may help sustain better profit margins. However, if ordinary publicly sponsored Medicare programs are required to include some of the treatments that only MA plans presently cover, Clover’s market share may suffer. As a result, the specifics matter, and each specific component of healthcare law may generate concerns.
4. The Business Model May be Modified
Clover Health’s mission is to provide insurance at a lower cost than counterparts while also refunding healthcare personnel sooner and assisting them in lowering their healthcare costs or spending. The company also intends to repay suppliers double the normal market price. To achieve this, the company will use the Clover Assistant software system, which employs cutting-edge tech to deliver on its cost-cutting commitments to clinicians. And if the software is unable to reduce the price of care provision, Clover will have significant difficulties. It may not be sustainable in the long run, particularly with fewer funds streaming in from every consumer than would be anticipated with the competition. As a result, the business model might have to change significantly in the long-term, which will undoubtedly be an important milestone for long-term investors.
What Makes Clover Health Interesting
The fact that Clover is making huge profits is the main reason it’s an intriguing healthcare stock that could be worth an investment. The company earned $427.2M in the third quarter, representing a 153% increase in quarterly sales annualized. In terms of engagement, the company anticipated that the number of MA members would increase by up to 17% in 2021, reaching up to 68,000 subscribers. Clover’s business model, as previously noted, is based on the use of the Clover Assistant program, which generates benefits for clinicians to stay on the company’s network. Patients can also contact a larger network of physicians than they could ever ordinarily and at a cheaper out-of-pocket expense. Provided Clover can make profits and the software can, as it says, reduce expenses for everyone, sounds terrific for both the investors and the subscribers.
The Bottom Line: Is CLOV Stock a Solid Long Term Investment?
CLOV stock is worth a buy if you’re looking for an investment that could skyrocket over the coming years. However, it’s relatively risky given that Clover is an insurance firm. I believe it is wiser for investors to wait because there are vital components of its business plan that could be in contradiction with one another. Even though you don’t intend to buy it right now, CLOV stock is still worth keeping an eye on. As it extends its services, the company expects to expand subscribers. Clover is also developing software that will be accessible across all Electronic Health Records (EHRs). As a result, Clover Health may be a solid long-term growth stock worth investing in.