EverQuote stock hits 3-year low; Raymond James downgrades on weak outlook

May 03, 2022 9:45 AM ETEverQuote, Inc. (EVER)By: Jessica Kuruthukulangara, SA News Editor

Car Insurance

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EverQuote (NASDAQ:EVER) stock continued its downward spiral, tumbling as much as 36.5% to a 3-year low on Tuesday on the insurance marketplace's disappointing guidance.

Raymond James downgraded EVER to Market Perform from Outperform, maintaining its price target at $19, which implies 28.6% potential upside to its last close.

In a note to clients, analyst Aaron Kessler said auto headwinds are expected to persist longer than initially expected, leading to the downgrade.

"While we are optimistic that auto growth can return to prior growth rates of ~20% in 2023, we expect shares to remain largely range bound until we see the top line recovery as well as improved bottom line leverage," he added.

In a post-earnings call, CEO Jayme Mendal said EVER's direct carrier channel continues to face significant challenges. There was pullback in carrier auto demand in Mar., which was amplified in Apr., as carriers exited unprofitable states and segments with little advance notice.

In the past week, a large carrier partner unexpectedly told EVER that due to "immense profitability pressures this year", it is slashing its Q2 and Q3 customer acquisition budgets.

"... we remain substantially below the levels of carrier demand in our auto verticals that we saw in Aug. 2021 which we believe to be the level to which we will normalize upon the markets recovering," said Mendal.

Apart from continued headwinds from auto carriers, EVER also expects lower health demand in Q2, reflecting seasonality entering the Medicare lock-in period that follows the Q1 open enrollment period.

EVER stock declined 38.6% YTD and 21.6% in the last 6 months.

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