Yesterday was huge for Medicare insurance firm Clover Health Instruments (NASDAQ:CLOV), as the company shot up 85.8% on the strength of around 35 times normal volume. The gains kept right on coming in premarket trading, as the company was up an additional 24.2% there, and the company has held at least some of those gains going into this morning's session as well. While investors are rushing to join in on Clover Health's gains, the financial analyst community is skeptical and increasingly bearish about the company's chances going forward.
Clover Health, the Latest Meme Stock?
The biggest cause of Clover Health's growth seems to trace back to its recently-minted status as a “meme stock.” A new darling of social media, especially sites like r/wallstreetbets, individual traders are pouring into the stock. Stocktwits, a site focusing on trading, saw message volume about Clover Health better than double at one point, and nearly all of the messages—95.4% at last report—were positive.
Other “meme stocks” didn't fare quite so well; former darling GameStop (NYSE:GME) was up 2.7% ahead of its earnings announcement at the end of trading today. AMC Entertainment (NYSE:AMC) slipped 7.4%, and BlackBerry (NYSE:BB) was down 5.4% in trading.
Clover Health's status as a “meme stock” may be the biggest reason for its sudden growth, but its primary product line likely has something to do with it as well. The company focuses on Medicare plans, but also has diagnostic software sold under the brand Clover Assistant.
There have been some problems with Clover Assistant in the past, reports note; Hindenburg Research, the short-selling research operation that famously took on Nikola (NASDAQ:NKLA), noted that the software often made useless diagnoses that were difficult to remove. Reports also note that the company is under investigation by both the Securities and Exchange Commission and the Department of Justice. Recent reports, however, note that Clover Health has been on a hiring binge, and its health plans have seen record levels of enrollment for the first quarter of 2021 as the US population ages into Medicare. The company also issued full-year guidance for revenue, looking for it to come in between $810 million and $830 million. This is largely in line with consensus estimates calling for $822.58 million.
What Are Financial Analysts Saying About the Clover Stock Forecast?
While individual investors are piling into the stock, looking for a chance to get in on GameStop-style gains, financial analysts are much more skeptical about the Clover Health stock forecast. Since February 2021, the stock has been rated a consensus “hold”, down from a consensus “buy”.
Three months ago, the company had one “buy” rating and two “hold” ratings to its credit. That ratio held into May, but today, the ratings stand at two “buy” and three “hold”. The ratios are improving, but there's still a clear caution afoot.
Price targets occupy a very narrow range. The current average is $10.60 per share, with a high of $15 and a low of $9. Given that the Clover Health stock is currently trading at $25.68 per share, there's clear downside potential to go along with this stock.
Recent moves from analysts, meanwhile, have been fairly light. A research report from Citigroup back in May reduced the price target for Clover Health from its previous $13 to $10, though the analyst had a “buy” rating on the stock. More recently, Bank of America lowered its target to $9 from its previous $15. Credit Suisse also dropped its price target to $9, but lowered it from a previous $10.
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