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Clover Health Is Still Expensive


  • The company's Clover Assistant proprietary platform is the most important lever, but may not be significant enough to be considered a wide moat.
  • Clover Health must do more to scale up its CA platform to penetrate its markets further and ramp up its revenue growth aggressively.
  • CLOV stock price is still expected to experience significant volatility, and investors should be patient before adding further to their positions.

Doctor holding a card with text MEDICARE, medical concept
Photo by Vadzim Kushniarou/iStock via Getty Images

Investment Thesis

Clover Health (NASDAQ:NASDAQ:CLOV) has fallen about 43% from its early January high, but the stock is still much more expensive compared to its larger competitors. The Clover Assistant platform has done well

This article was written by

JR Research profile picture

JR Research is a seasoned investor with a background in economics. He focuses on identifying 3 main things - leading growth companies, emerging market trends, and secular growth opportunities. His approach combines price action with fundamentals investing.

He runs the investing group Ultimate Growth Investing which specializes in identifying high-potential opportunities across various sectors. The group is designed for investors seeking to capitalize on emerging, high-growth opportunities, and investors looking for sustainable growth opportunities at a reasonable price.

Learn more

Analyst’s Disclosure: I am/we are long CLOV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (25)

Gaucho profile picture
THIS STOCK HAS AT LEAST 100% shorted including FAKE SHARES

The shorts have issued over 52 million FAKE shares plus the 40 million shorted shares. ACCORDING TO NASDAQ
148 million outstanding shares
Plus 40 million shorted share
188 million TOTAL legitimate shares in market

Insider own 85 million
Institutions own 155 million
SOO 240 Shares owned

PLUS The total number of RETAIL owned shares
bazooooka profile picture
Warrants are saying this one goes higher. Not sure we would go much lower than recently.
Wimal profile picture
@JR Research How is CLOV different to OSH (Oak Street Health)?
The CLOV CEO made out that what they do is completely unique in the health care sector ....but that does not seem to be true. See this presentation from OSH:

JR Research profile picture
@emthree Thank you for your comment. I'll take a look at that and update in the next article on CLOV
Gruss_Gott profile picture
@emthree casual glance, OSH is different in that they own the clinics so presumably the docs are their employees thus only use OSH tools, are well trained on them, and are incented to use them well. When you combine that with people who deeply understand Risk Adjustment and Quality (and clinical & ins operations) it can be a real formula for success ...

... but then at that point why not invest in, say, OptumCare who does most certainly understand all of those things and is WAY larger? Maybe for growth I guess?

CLOV's challenge is there are no magic beans in RA & Quality and you only have look at CLOV's RA reimbursement & Quality stars (<3.75) to know, if there are magic beans, CLOV sure doesn't have any of them.

And then CLOV is trying to approach health systems who have other insurers and use their tools - why would they use CLOV's tools more than others? CA is doing the exact same thing as all the other tools ("hey doc, check this patient for this condition") and, according to their stars scores, getting worse results.

All of these small MA startups try to bamboozle people with TECH! AI! blahblahTECH! when none of that crap matters much in actual RAR & QBP revenue - it's all tablestakes, but people outside the MA world don't know that so it all sounds like magic beans.

Most of these startups are touting the genius of the Medicare Advantage model as if they invented it or are the first people to discover it - they're not - and while they're busy telling you that, what they're not saying is how they're uniquely positioned to beat the average (or even be average in CLOV's case)

What's unique about OSH is they appear to own the docs, and that gives their clinics an advantage, but does anyone think OSH will be as big as Bon Secours, Cleveland, or OptumCare?

Then why would investors care? Serious question.
Wimal profile picture
@Gruss_Gott Thanks for sharing your insights. Btw; where do you get updates on Clover Assistant's Quality Start rating & Risk-Adjusted Reimbursement data?

This is Clover's pitch on why CA is uniquely different to anything out there for primary care physicians treating patients under Medicare Advantage;

@JR Research Any thoughts on why the market was so displeased with the earning results?
JR Research profile picture
@dt-investing Thank you for your question. There's no way to know what really caused the move, even though speculation points to the bear attack following the Hindenburg report. seekingalpha.com/...

However, it is better to avoid speculation, and focus on price action and the fundamentals instead.

At the current price point, I find CLOV very attractive. I will discuss the details of the earnings report subsequently.
Gruss_Gott profile picture
@JR Research FYI, a lot people do seem to have reasons for being displeased:

"... It no longer appears to us that the company will be able to meet its lofty membership growth targets after now missing its original MA and DC guidance, creating more limited upside potential and lowering visibility ..."

-- BofA analyst Kevin Fischbeck

And, as pointed out earlier, and this is key:

Clover Assistant is a tool with the sole purpose of engaging docs to assess, diagnose, treat, and code members accurately - when that's working, CLOV's stars scores go up (i.e., at least 3.75 stars), and their risk adjustment reimbursement (RAR) is maximized.

CLOV is currently below 3.75 stars and a laggard in RAR ... which means CA is likely not working.

Further, if CA was a big competitive advantage, CLOV would be much better off dumping the insurance product operations and simply selling UNH, HUM, et al a per-member-per-month recurring revenue CA bundle - this would enable them to make software margins on Medicare Advantage's growth without the hassle of insurance product operations!

Thus it seems pretty clear CLOV is not currently doing well at population health management, insurance product design, or risk/quality operations.

Doesn't mean they can't, but nobody seems to have any plausible theory on how they improve any of this - if you do I'd love to hear it!
JR Research profile picture
@Gruss_Gott Thank you for your comment. I will discuss the earnings report in a subsequent follow-up article.
Gruss_Gott profile picture
Key Questions:
(1.) If Clover Assistant is a competitive advantage, why is CLOV a 3 star plan & why is CLOV's Risk Adjustment reimbursement a laggard? Aren't those the exact metrics that would tell one CA is working?

(2.) Insurance product-wise, UNH for example, has been designing consumer plans for a few decades ...is CLOV out-designing UNH, HUM, et al with *profitable* plans members want more? If not, how do they take market share?

(3.) If so, can CLOV continue to do that across markets nationally? (Again, if CA is a competitive advantage, the measure for that advantage is STARS & RAR; why is CLOV a laggard if they have an advantage?)

(4.) Any sizable competitive market means contracting w/ large clinic systems (e.g., Bon Secours, Mayo, et al) who are already contracted with a lot of other insurers including UNH, Humana, et al ... If a clinic has 7,500 HUM members and 23 CLOV members will docs pay more attention to CA than to whatever tools UNH/HUM has? With fewer CLOV members visiting daily, will docs even remember how to use CA? Or even try?

For a small ma & pa clinic w/ primarily CLOV members, sure, CA likely works as well as anything, docs will probably do their best to use it ...

... but then UNH, Humana, et al aren't in those markets for a reason: they're not profitable!

In smaller markets, CLOV *may* have a nice small business that grows with the MA population; like Dynamic Health, Bright, Devoted, and all the other small regional plans ... but those plans also always stay small & regional ... so how does CLOV break through?

CLOV could blitzscale markets, selling plans at a loss to gain membership, but UNH & HUM aren't exactly new to this game nor cash poor - the minute CLOV grabs a foothold in a market they want, they'll probably clinic-contract and/or price CLOV out of the market.

To beat competitors, CLOV has to hit a hattrick in any competitive market:

(1.) Better product (i.e., consumers like it better than competitors)
(2.) Better doc network (i.e., docs perform better - usually a func of # of mem)
(3.) Better quality bonus program & risk adjustment revenue programs (this is measure of ops + tools like CA)
Table Stakes: all of the normal ins operations, contracting, clinical programs, accurial, et al

To be long CLOV:

One has to believe either CLOV can beat the bigs in large competitive markets and/or CLOV can *profitably* assemble enough semi/un-contested small ma & pa doc shops in enough small markets to continue growing faster than MA.
Given their proprietary platform, it’s interesting that you chose to compare CLOV’s value against the healthcare industry. I view this as a tech company focused on the healthcare industry, and thus not overvalued.
JorgeRoberto profile picture
This is a 5-10 year investment for me, adding at every dollar down. IMO the worst case, Clover is profitable by the end of the year with over 1B on revenue. That would be enough to cause a beautiful squeeze. Insiders want to go to the moon as well.
JR Research profile picture
@JorgeRoberto CLOV seems to be gaining support at the $8.6 region right now. However, as I already have a full position for this stock i may consider adding if it goes back to $7.
JorgeRoberto profile picture
@JR Research shares don't expire, $7 is strong support, value investors would be buying if it dips more. Shorts are taking more risk, they had to double to push it down from $11, so they would be more vulnerable to cover even more lol. There are smart institutions that would join the squeeze just like they did with GME, stars are aligning before it goes to the moon.
Seneca75 profile picture
Last time I checked, 2X forward sales is not expensive for a growth company.
Baloney Sandwitch profile picture
@Seneca75 Can't go by sales for insurance. You can get all the sales you want to lowering prices.
Seneca75 profile picture
@Baloney Sandwitch you can absolutely go by sales as long as MCR is in line...
The market share increase YoY is impressive. I'm long this company. I'm in at just under $9 and will be buy more if it goes near the $7-8.5
Clover is going to the moon!!!
There are going to be 100 million more people added to Medicare. I can’t help but think Lord google predicted this. This is noise. If it drops I’m backing up the truck and doubling my position
IncrmntTds profile picture
I will add to my position if the price retraces or if growth increases significantly. Thank you for the article.
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