Has eHealth Fallen Too Far?

Revenue for the fiscal year of 2014 is expected to be in the range of $43 million to $45 million and earnings per share are expected to be in the range of -$0.56 to -$0.47. Thomson Reuters has consensus estimates of -$0.11 in earnings per share and $52.63 million in revenue.

In the fourth quarter, submitted applications for Medicare Advantage and Medicare Supplement products combined grew 46%, compared to the same period in the previous year. Also the number of submitted applications for all Medicare products, which also includes Prescription Drug Plans, grew 22% in the same timeframe.

Stuart Huizinga, CFO of eHealth, explained the shortfall:

Fourth quarter revenues and earnings were impacted by a shortfall in our Individual & Family Plan sponsorship and advertising and other ancillary revenues driven by lower than expected IFP application volumes and by the timing of several million dollars of Medicare revenues which were pushed out into the first quarter of 2015. In addition, fourth quarter earnings were impacted by the fact that we spent considerably more than we planned on Medicare marketing costs due primarily to stronger than expected application growth in our Medicare business.

Looking at the stock historically, it went absolutely gangbusters during the health care sign up in 2013. The stock started around $20 and went to $40 ahead of health care enrollment. Following enrollment it went from $45 to over $60. Since that time the stock has fallen over 80% from that high to current prices.

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Looking back at this summer, Stifel was the only analyst with a Sell rating for this stock. It looks like a very smart call now.

Shares of eHealth were devastated in Thursday’s trading, down over 50% at $9.60, marking a new 52-week low. Along with the drop in the share price, the market cap fell more than $170 million, from its previous level of about $350 million.

The stock has a consensus analyst price target of $25.25 and a 52-week trading range of $9.31 to $63.32.