Clover Health Stock Price Forecast July 2021 – Time to Buy CLOV?
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Clover Health (CLOV) stock tumbled 14.6% yesterday and closed at the IPO price of $10. The stock was however trading higher in US premarket price action today. What’s the forecast for CLOV stock and is it a good buy in July 2021?
Clover Health went public through a reverse merger with Chamath Palihapitiya’s Social Capital Hedosophia Holdings III (IPOC). He has also taken Virgin Galactic, Opendoor, and SoFi public. Meanwhile, Clover Health stock has traded weak after the merger and went below the IPO price of $10. It was the only company sponsored by Palihapitiya to fall below the IPO price. All others including those that are yet to merge trade above $10.
CLOV stock technical analysis
CLOV stock has fallen below the 20-day and 50-day SMA (simple moving average) both of which have been strong support for the stock. It is however getting near the oversold zone now with a 14-day RSI (relative strength index) of 42. The stock would now face resistance at the 50-day SMA which is currently at $10.44. If it manages to cross above the trendline, we could see a short-term technical uptrend in the stock.
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Clover Health was accused of fraud by Hindenburg Research
In February, Hindenburg Research released a critical report on Clover Heath and said that the company, along with “Palihapitiya, misled investors about critical aspects of Clover’s business in the run-up to the company’s SPAC go-public transaction.” It accused the company of not disclosing the Department of Justice investigation against it. It also accused its subsidiary Seek Insurance of falsely claiming that it is independent.
The report also said, “Multiple former employees explained that much of Clover’s sales are fuelled by a major undisclosed relationship between Clover and an outside brokerage firm controlled by Clover’s Head of Sales, Hiram Bermudez.”
Hindenburg Research
Hindenburg has built its reputation by putting out credible short-seller reports. There were top management changes at least two companies namely Nikola and Lordstown Motors after Hindenburg accused them of fraud. Meanwhile, Clover Health and Palihapitiya dismissed the allegations. Commenting on the DOJ investigation, CLOV said that it did not disclose them to investors as they were not material.
Meanwhile, CLOV stock tumbled after Hindenburg Research findings and fell to a low of $6.31. While several SPACs (special purpose acquisition companies) have fallen below the IPO price of $10, CLOV stock falling below the level came as a big blow to Palihapitiya’s reputation who is known as the “king of SPACs”
Clover Health stock was targeted by Reddit traders
Meanwhile, Clover Health stock was sagging below the $10 price level when it was targeted by Reddit traders in an epic short squeeze. The stock climbed to an all-time high of $28.85 before paring gains. The stock was looking to stabilize before the crash yesterday.
CLOV stock tumbled yesterday after the lockup expiry. In simple terms, insiders can now exit the company without any regulatory hurdles. It is not uncommon for stocks to fall after lockup expiration as markets fear selling pressure from insiders. Nikola, for instance, tumbled after its founder Trevor Milton sold his shares after the lockup expiry. Even Palihapitiya sold shares of Virgin Galactic that led to a selloff in the stock. After all, insiders selling stake is generally seen as a negative sign as it reflects that they are cashing out.
Clover Health stock forecast
Analysts have a mixed opinion over Clover Health stock and it has split ratings. Of the five analysts covering the stock, two rate them as a buy while two rate them as a hold. One analyst has a sell rating on the stock.
Its average target price of $10.8 implies an upside of 8% over yesterday’s closing prices. Its highest and lowest target prices at $15 and $9 respectively. Last month, when CLOV stock surged amid the Reddit-driven rally, Bank of America downgraded the stock from a neutral to underperform and assigned a target price of $10.
Bank of America downgraded CLOV stock
“After the recent spike in CLOV, we are downgrading [because] the company is now trading at a 70% premium to ALHC [its closest comparable stock] despite a similar growth profile and lower near term margin trajectory,” said Bank of America analyst Kevin Fischbeck.
He also expressed concern over the lower guidance for members. “To some degree, we think falling short on membership in a new government program is completely understandable given the number of moving pieces, but doing so the quarter after lowering the MA membership guide leaves us with low visibility into the outlook,” said Fischbeck in his release.
Should you buy CLOV stock
Clover Health is a fast-growing company and it’s the fastest-growing Medicare Advantage plan in the US. Palihapitiya believes that CLOV is a “10x idea” and called it “one of the most straightforward investments I’ve ever made.” Analysts expect the company’s revenues to rise 21.7% in 2021 and 30.4% in 2022.
Clover Health is expected to become profitable on the EBITDA level by 2023 and is a bet on the growing Medicare spending in the US which by estimates is expected to double between 2019 and 2025.
Looking at the valuations, Clover Health stock is valued at a 2023 EV (enterprise value)-to-sales multiple of 2.1 which looks attractive. Overall, the recent dip in CLOV stock looks like a good buying opportunity.
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