Clover Health stock (CLOV) - Get CLOVER HEALTH INVESTMENTS CORP Report finished the month of July almost 35% lower. Despite elevated short interest and a strong ape community determined to bet against short sellers, there has been no sign of a short squeeze recently.
Wall Street Memes takes a closer look at what might be keeping CLOV from going to the moon.
(Read more from Wall Street Memes: 2 Meme Stocks On The Edge Of A Short Squeeze)
Clover reported first quarter earnings on May 17, and it looks like the company still has work to do. Although the stock’s rally to a peak of $22 per share happened after earnings, the results themselves have been mixed at best.
Despite delivering 18% growth in memberships and $200 million in revenue in its most recent fiscal quarter (21% growth), Clover also reported an EPS miss of two cents against Wall Street’s expected $0.11 loss. It did not help that revenue guidance for the next period slightly missed consensus as well.
Wall Street is not impressed
The most recent Wall Street research reports have not been bullish. The latest analyses from Wall Street on CLOV were two downgrades from neutral to sell. Some of the skepticism appears to be related to the company’s financial performance.
More recently, analyst Lisa Gill of J.P. Morgan lowered the target price from $15 to $9 after first-quarter results. According to her, "[Clover] lowered most guidance metrics, including reducing the number of beneficiaries aligned under the direct contracting program in 2021 by 50%."
The second bear was Bank of America’s Kevin Fischbeck. In June, the analyst placed a target price of $10, claiming that fundamentals no longer supported valuations, due to the stock's exposure on social media. The silver lining: he believes that Clover is likely to outgrow the Medicare Advantage market.
Then, there was the report issued by research firm Hindenburg Research digging into the Department of Justice’s investigation of Clover over irregularities in its business. This bearish account probably helped to boost negative sentiment in the market.
(Read more from Wall Street Memes: CLOV Stock: Loved By Redditors, Disliked By Wall Street)
Many apes believe that the company's shares price action has been influenced by dark pool activities, as they claim that institutional players and high-frequency traders (particularly those on the short side of the trades) benefit from the lack of transparency.
The impact of dark pools in pushing CLOV share price lower is a hot topic of discussion, and not at all an unanimity at this point. However, the discontentment of the apes regarding this subject keeps the stock in the spotlight, fueling the thesis that CLOV could be valued (much) higher than it currently is.
(Read more from Wall Street Memes: AMC Stock: Apes’ Battle Against Dark Pools)
Reasons to be bullish
Fundamentally, the company’s innovative business model in the Medicare Advantage segment through data-driven and artificial intelligence-enabled software is a key reason to invest in Clover. Opportunities seem to exist for the stock to fly high in the long term.
In the short term, the company remains heavily shorted and backed by a loyal ape community, which could put CLOV on the edge of new short squeezes. According to Yahoo Finance, nearly 30 million shares are shorted out of a float of 112 million (representing 25%).
However, keep in mind the risks for both the short- and long-term scenarios. CLOV’s elevated short interest probably raises a yellow flag that investors should not take for granted.
Shares of Clover Health finished the month of July almost 35% lower. In your opinion, what is stopping the stock from going to the moon? Follow @WStreetMemes on Twitter and vote on the poll below!
(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)