Ehealth, Inc (NASDAQ:EHTH) is an online health insurance marketplace focused largely on Medicare. It represents all the major providers, including Aetna, Humana Inc (NYSE:HUM), and UnitedHealth Group Inc (NYSE:UNH). It even owns the Medicare.com domain name, making it a savvy SEO company with a range of websites.
You know healthcare and health insurance are important, but as an investment does the company make the grade – is eHealth stock a Buy?
The industry took some major hits with the pandemic – premiums rose within months of the initial outbreak. It pushed insurers to take necessary steps to keep loss ratios at acceptable ranges. And the company’s competing with the government’s own health insurance marketplace.
Healthcare.gov saw enrollment rise, with 8.2 million Americans enrolling in a health plan through the federal Affordable Care Act exchange. These issues caused analysts at RBS to downgrade the stock and lowered prices.
It could be a signal of a company with low growth prospects, but it could also represent a rare buying opportunity of a company “on sale.”
Let’s check the vital signs to see if eHealth will provide healthy returns for investors.
What Does eHealth Do?
eHealthinsurance is a Santa Clara, California-based private health insurance marketplace that runs a collection of websites. It was founded in 1997, making it a pioneer in digital insurance. The company’s websites include:
The company works with consumers to find healthcare plans through either Medicare, Medigap, or private carriers. It has strong consumer acquisition and digital search engine optimization that makes each website an asset.
Although eHealth was one of the first businesses to sell consumer insurance online, the government finally stepped into the marketplace in the 2010s. The 2013 launch of healthcare.gov is widely seen as a failure, and it isn’t viewed as being much better today.
Because it has a wide footprint of websites with a couple of decades head start, eHealth has a competitive advantage.
In March 2020, the company released 1.8 million shares to the public, which raised a net of $227.5 million. The company’s executive team long lobbied for government healthcare reform and current CEO Scott Flanders argued publicly against the Affordable Care Act.
However, the pandemic creates a lot of problems for the entire healthcare and health insurance industries. Someone must bear the burden of COVID-19 costs, and that has bearish investors wondering if it’s worth snapping up any shares at all.
Is eHealth Stock A Buy?
In its third quarter earnings report, the company showed a $15 million net loss on revenue of $94 million. This fell far short of C-suite expectations and signaled overall difficulty heading into open enrollment.
The next earnings report will include the pandemic open enrollment, and that’s the industry’s biggest sales season. Consider it Black Friday for the health insurance industry. But forecasts are low, and that means the company is facing strong competition.
Still, it has $225 million in financing from HIG Capital on the way, and it continues finding ways to move forward. The overall eHealth market size is estimated to grow from $69.5 billion in 2020 to $193.8 billion in 2025.
That’s a big pie, if eHealth can survive long enough to eat it.
Will eHealth Premium Hikes Hurt EHTH Share Price?
You’re surely sick of hearing about it by now, but the long-term impact of the global COVID-19 pandemic can’t be understated. The health insurance market had no choice but to raise premiums in response to the outbreak. This raised the burden of costs on American workers, leaving many with few options.
Unemployment rates spiked over 10 percent in 2020 and are still high in 2021. That means the pool of uninsured and underinsured people will grow too. One of the problems of poverty is that healthcare premiums fall more easily to the way side as staples take precedence in consumer budgets.
These trends will certainly affect eHealth, as will the return of a Democratic-led White House and Congress. Not only that, but members of the current administration were pivotal in the original ACA passage.
If eHealth wants to survive, it needs to pursue an aggressive marketing strategy used by other insurance companies like from Aflac to Geico. Otherwise, it may lose to a new app-based competitor that finally does it right.
eHealth Was 1st But Rivals Galore Exist
Although it was the first, eHealth isn’t the only private health insurance marketplace. It competes with major competitors like Reliance Standard, Anthem Blue Cross and Blue Shield, CorVel, and HealthMarkets.
Each of these competitors is trying to grow its share of a lucrative business. Healthcare and its digitization are big trends moving forward as both boomers and millennials are old enough to need medical attention.
But the economy is being held up through a recession by government stimulus. It’s only a matter of time before insurance costs get so high they’re neglected, and that’s when the race gets more heated for these companies.
Is eHealth Stock A Buy? The Bottom Line
eHealth is a private health insurance marketplace that offers both private and Medicare plans. It partners with big-name group providers and has a strong focus on providing health insurance for those who can’t easily get it.
Of course, the pandemic brought challenges to the industry. The company continues selling stock and raising capital to finance its way through the difficulties. Premiums are being raised across the board, and healthcare costs are rising as people are dying.
The American healthcare system faces major problems heading into the 2030s as millennials start creeping into retirement. It’s a massive generation of people who need the state-of-the-art medical treatments in development.
The bottom line from an investment perspective is EHTH share price has an upside potential of $78.64 per share based on a cash flow analysis discounted.
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