Clover Health stock (CLOV) - Get CLOVER HEALTH INVESTMENTS CORP Report has accumulated losses of nearly 40% in July alone. But its strong Reddit support base continues to believe in a comeback, as the stock remains heavily shorted: 36 million shares out of 376 million outstanding, according to YCharts, very close to the 2021 peak in June.
Fundamentally, the story is a bit different. Clover has been at the center of controversies in the healthcare industry and subject to caution by Wall Street experts. Today, Wall Street Memes looks at the bull and bear cases.
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Why Redditors like the stock
CLOV is a fan favorite in meme mania – although some may disagree that the stock falls squarely into the “meme” category. The company is in the business of using technology and data analytics to innovate in the health insurance space.
The appeal of this stock may start with the company’s growth opportunities. Medicare Advantage enrollments have doubled in the past ten years, and the trend is looking favorable. The market is expected to expand from $270 billion to $590 billion by 2025.
In addition, with the stock still being a target of short sellers, a squeeze similar to the one that happened in early June (when share price spiked 220% in a matter of days) is not out of question. WallStreetBets seems to have taken notice, with volume of comments having spiked lately (see below).
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Why Wall Street dislikes the stock
Research firm Hindenburg Research infamously reported that Clover Health has been investigated by the Department of Justice for its business and sales practices, leading to 12 potential infringements. CEO Vivek Garipalli spoke out, emphasizing that Clover is focused on serving the underprivileged:
I always find it fascinating when folks root against Clover, because if we're successful, look who benefits. Why is that bad?
The bad press did not end there. CEO Garipalli defended Clover from claims of price gouging that has allegedly impacted underserved patients in New Jersey. Health economist Guy David was skeptical of Clover CEO's comments, claiming that the company “profited off of [marginalized people]".
Wall Street seems to be at least cautious about CLOV, if not outright bearish. According to TipRanks, most analysts (three out of four) consider the stock a hold or sell, with JPMorgan having recently downgraded the name to underweight:
Following first-quarter results, Clover Health lowered most guidance metrics, including reducing the number of aligned beneficiaries under the direct contracting program in 2021 by 50%.
CLOV investors and stock enthusiasts: which of the following best explains your interest in Clover Health stock?