UPDATE: eHealth (EHTH) PT Lowered to $63 as Credit Suisse Evaluates SLQT and GOCO Fallout
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(Updated - February 2, 2021 8:03 AM EST)
Credit Suisse analyst Jaliendra Singh lowered the price target on eHealth (NASDAQ: EHTH) to $63.00 (from $130.00) while maintaining a Outperform rating after the company preannounced its 4Q results, on Friday, significantly below expectations primarily driven by a shortfall in its Medicare enrollments.
The analyst stated "EHTH attributed the enrollment underperformance to its external agent force, its marketing channels (particularly Direct Response TV), COVID, and an extended election cycle. Based on the information disclosed in the earnings release (EHTH is holding off on any conversations with sell-side analysts until their earnings release), we attempted to validate these explanations. While the consistent operational challenges have been frustrating, we performed this analysis not only to determine how much further downside there may be in EHTH shares but also what EHTH’s preannouncement implies for SelectQuote, Inc. (NYSE: SLQT) and GoHealth Inc. (NASDAQ: GOCO)". He went on to state "Unlike EHTH, GOCO does not leverage agents from third-party resources. GOCO’s “external” agents are not employees but are brokers that utilize GOCO’s infrastructure and engage in a revenue share arrangement (~10% for GOCO). Those agents rely on GoHealth's technology platform, compliance platform, etc. to enroll consumers in health insurance plans and scale their business. This is purely a volume play for GoHealth, as it strengthens its relationship with carriers and brokers. In fact, GOCO’s external business is barely profitable and is not the company’s core growth focus. Separately, SLQT employs a “flex agent” model where it
temporarily reassigns agents from its other segments to its Senior business during AEP/OEP. This allows the company to service customers during periods of surge demand, while also minimizing overhead costs during the shoulder seasons."
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