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CLOV Stock: Wall Street Bearishness Vs. Bullish Sentiment

Recently, bears on Wall Street took a swipe at Clover Health stock based on company fundamentals, stopping a potential rally in its tracks. Still, bullish momentum could prevail.

Medicare Advantage company Clover Health  (CLOV) - Get CLOVER HEALTH INVESTMENTS CORP Report has featured among the most popular across the main online discussion boards. Many momentum traders hope to see another short squeeze, following the June one that propelled the stock higher by 140% in only three trading sessions.

Recently, the stock’s popularity on Reddit forums, coupled with elevated short interest and a bullish technical setup, led share price to rise 23% on September 7 alone. However, since then, the stock has corrected back to $8.50 apiece. The pullback could be blamed on a bearish Wall Street research note released on September 9.

Which will be most influential factor in driving CLOV price going forward? Sell-side bearishness or retail investors’ bullish sentiment?

Figure 1: Clover Health logo.

Figure 1: Clover Health logo.

(Read more from Wall Street Memes: This Popular Reddit Stock Is a Cathie Wood Favorite)

Wall Street bearishness

The latest take from Wall Street came from Cowen. The analyst initiated coverage on CLOV with an underperform rating and $7 price target. Bearishness was justified on skepticism that Clover Assistant will, in fact, “yield best-in-class care management and per-capita medical costs”.

Also, Cowen’s analyst mentioned that volatility driven by CLOV’s popularity on Reddit forums may also impact the stock negatively.

Earlier in September, it was Citigroup’s turn to initiate coverage on the stock, in this case with a neutral rating. The analyst mentioned that Clover’s challenges outweigh its opportunities. He also set a $10 price target that was barely 10% above the market price at that point.

In the last 3 months, based on 4 Wall Street opinions, CLOV received a moderate sell consensus rating with an average price target of $9 – that is, insignificant upside relative to the stock’s high volatility.

Retail investors’ enthusiasm

While Wall Street does not seem overly excited about CLOV, retail investors remain very interested in the stock. CLOV’s popularity has just reached a peak since the June short squeeze (see chart below). This time, however, popularity has not translated into sustainably higher share price, at least so far.

Short interest of 15% is still considered high – although not as much as it had been in June, when 36% of the float was shorted. But as Wall Street bearishness continues to mount, short interest could very well pick up, and the case for a short squeeze could gain strength.

Figure 2: WallStreetBets ticker sentiment - CLOV

Figure 2: WallStreetBets ticker sentiment - CLOV

Wall Street Memes’ take

Wall Street analysts have been doing their jobs: to analyze companies and their stocks based on business fundamentals. Clover is still in the early stages of proving its business model viable and profitable, despite Direct Contracting and Clover Assistant having produced solid results in Q2.

However, analysts and investors should not underestimate the upside opportunity that may be unrelated to business factors. Fundamentals without consideration for the impact of meme frenzy tells an incomplete story, in our view.

Twitter speaks

Clover Health enthusiasts: do you see CLOV as an AMC- or GameStop-like “stonk”?

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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)