CLOV was once a meme stock but now I believe is a strong long term play that is highly undervalued.

My position:

150 $3 Jan 2023 Calls

50 $5 Jan 2023 Calls

With upcoming catalysts, now is the time to get in.(Before earnings, before Russell Reconstitution)

People

Clov has pulled in some top tier leadership. Two people to highlight are:

Andrew Toy is the President at Clover, where he is responsible for driving the vision for how technology and analytics can improve the lives of Clover's members. Andrew joined Clover from Google, where he coordinated enterprise activities for the Android team and ran Machine Learning, Enterprise Search and Analytics for the G-Suite team. Before that, he was the CEO and co-founder of Divide, a company focused on creating a split between work and personal data on mobile devices, which was acquired by Google in 2014.

Jamie Reynoso is the Chief Operating Officer at Clover Health, where she is responsible for plan operations including service, network, clinical and IT. With over 30 years experience in the healthcare industry, Jamie has a strong background in health plan operations with a focus on Medicare and Medicare Advantage. Prior to joining Clover Health, she spent over 16 years at UnitedHealth Group where she held various roles including Vice President of Emerging Business. She’s also been responsible for payer strategy and operations at a large national hospital system and most recently served as CEO of a provider-sponsored health plan in Texas.

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Andrew Toy brings Google tech experience with a focus on enterprise software. While all of Clov revenue has historically come from Medicare products, Clov is trying to become a health-tech company with is Clover Assistant software. This is enterprise software is designed to help Doctors improve care for patients and ultimately reduce costs. At some point they plan to offer Clover Assistant as a Software as a Service product for non Medicare patients.

Jamie Reynoso has experience with UnitedHealth which is the largest Medicare Advantage provider. That knowledge will allow her to help Clov compete against industry giants.

Market

Clov has 2 primary sources for revenue both from the government through Medicare, Medicare Advantage and Direct Contracting tied to traditional Medicare.

Medicare Advantage has been around for years and allows those who qualify to pick their plan and company. Companies offer perks like money for groceries and memberships to gyms. Each plan also offer different costs with many having little to none out of pocket expenses.

Traditional Medicare is your true one payer system. Direct contracting was a pilot program that started in 2021 to allow companies to act in between the government and the healthcare provider. These companies would take some of the risk from the government with the ability to take some profit.

The total number of people eligible for Medicare is increasing every year. The percent of eligible individuals that choose Medicare advantage is increasing ever year as well.

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We can clearly see that the market is wide open for Medicare Advantage. Clov is currently number 10 for market share in 2022. They hold .28 percent of the market with an increase of .03 percent. During open enrollment to select a Medicare Advantage providers for 2022, Clov increased its members by 25 percent up to 82,000.

Cigna, ranked 6 for market share, actually lost members and market share for 2022. The number one for market share UnitedHealth continued to grow, but remember that Clov gained Jamie Reynoso who previously worked for UnitedHealth.

We can continue to expect Clov to grow every year as the market grow, but also because they are continuing to expand their geographical footprint. For 2022 they add 101 new counties bringing their total counties to 209 across nine states. Keep in mind there are 3006 counties. They have plenty of room to grow, and when browsing job listings they are hiring in states they do not have plans.

For Direct Contracting, Clov managed 61,876 / 344,000 total member as part this new Medicare program. In 2022 the government expects the total live to increase to over 1.8 million. If they could maintain the same market share here they would increase from 61k to 322k. Clov has more conservatively estimated they will only have 125k lives for DC in 2022. For reference they also only covered 10 states for DC in 2021 and have increased to 23 states for 2022.

Closing

When the company started trading publicly it was valued at $10. That may have been highly over valued based on the current price. Since then there have seen 2 dilution events in the from of warrant redemptions and a secondary offering. If we assume it traded initially at 2x its actual value of hypothetically $5 and it was diluted 20% that means based on fundamental is should be worth $4.

In 2020 when it started trading it had a revenue of $673 million, their guidance for 2022 is $3,000-3,400 million. I believe they are on track to hit those revenue goals. While they are still not profitable(they are spending lots of money to expand and grow) they will have 5x their revenue from 2020. Using the $4 value from above it isn't unreasonable to value them at $20. Even $10 stills has a nearly 400% upside from current prices.

Medicare Advantage Market Growth and Over View – https://www.chartis.com/insights/medicare-advantage-enrollment-continues-surge-increasingly-complex-and-competitive

2022 Clov Medicare Advantage Geographical Expansion – https://investors.cloverhealth.com/news-releases/news-release-details/cms-approves-clover-healths-expansion-plans-2022

2022 Medicare Advantage 25% growth – https://investors.cloverhealth.com/news-releases/news-release-details/clover-health-beats-expectations-medicare-advantage-membership

2022 Clov Expected DC growth – https://investors.cloverhealth.com/news-releases/news-release-details/update-clover-health-expects-average-number-direct-contracting