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CLOV Stock: Skeptical, Wall Street Still Sees 6% Upside

Wall Street’s bearishness on Clover Health stock is evident. Yet, analysts still see 6% upside potential. Here is what momentum traders should know about CLOV.

After trading sideways for the past few weeks, Clover Health stock  (CLOV) - Get CLOVER HEALTH INVESTMENTS CORP Report is at the center of attention on discussion boards. This “meme” favorite now faces bearishness from sell-side experts and elevated short selling volume, alongside a rise in popularity among retail investors.

Figure 1: Medicare insurer Clover Health.

Figure 1: Medicare insurer Clover Health.

Despite negative sentiment and a consensus “moderate sell” rating, Wall Street says that the stock is still 6% below fair price. Today, Wall Street Memes talks about this discrepancy and the upside potential that “the meme factor” brings to the table.

(Read more from Wall Street Memes: 3 Reasons Why SmileDirectClub Could Be The New Meme Stock)

10% upside, yet… bearish?

Based on the last three reports from Wall Street in the last three months, CLOV stock has an average consensus price of $8.67, suggesting 6% upside potential from current levels.

JPMorgan’s analyst Lisa Gill downgraded CLOV to a sell rating three months ago and forecasted $9 share price —12% gain opportunity. The analyst’s bearishness was supported by CLOV’s Q1 earnings, when the company “lowered most guidance metrics, including reducing the number of aligned beneficiaries under the direct contracting program in 2021 by 50%.”

Citigroup’s analyst Ralph Giacobbe initiated coverage on CLOV stock a month ago with a neutral rating, forecasting a $10 share price. The analyst warned investors that the company’s challenges outweigh the opportunities. But still, he sees 25% share price upside from current levels.

Cowen & Co.’s analyst Gary Taylor is the most bearish of all three. Also a month ago, he initiated his coverage on CLOV stock with a $7 share price target and sell recommendation.

Mr. Taylor is skeptical of the company’s core business model thesis: that overlaying Clover Assistant on unmanaged FFS physician practices will yield best-in-class care management and lower per-capita medical costs. The analyst also cited concerns over the stock being a meme target, which can create extreme volatility.

The discrepancy between Wall Street’s ratings (bearish) and price targets (mildly bullish) can probably be explained by stale share price projections. Since CLOV has dropped nearly 20% in the past three months alone, analysts may not have had the chance to revise their price targets lower – or, who knows, upgrade their ratings based on a buy-the-dip opportunity.

Popularity may be the game changer

Exposure is the key factor that may lead a meme stock to the moon. Meme frenzy benefited CLOV in early June, when the stock jumped more than 180% in a few days due to a gamma squeeze – widespread buying activity of short-dated call options for a particular stock.

Now, Clover stock has once again reached relevant exposure among retail investors, and the stock is often trending as one of the most popular on Reddit. Regardless of fundamentals, increased popularity coupled with a short interest ratio of nearly 10% that remains elevated could still propel CLOV higher in the next few weeks or months.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)