Investing

Options Traders Bank Strong Profits Crowding in Suspiciously Before eHealth's Blowout Q4 Upgrade

Ben Ward

Published: January 27, 2023 3:04 am

Last Updated: January 27, 2023 12:07 pm

Shares of online marketplace for health insurance, eHealth (US:EHTH) stunned the market with a 32.3% rally on Wednesday after reporting preliminary results from a blowout fourth quarter.

Management from the health insurer upgraded fourth quarter and full year financial guidance which beat analysts’ expectations after exceeding its cost reduction goals for the year which delivered more than $110 million in net operating cost savings.

eHealth now foresees fourth quarter sales in the range of $190 to $200 million vs analyst expectations of $177 million and a full year figure between $395-405 million which came in above forecasts of around $388 million. The full year upgrade was a step up from the prior guidance of $375-395 million.

Underlying profits measured by adjusted EBITDA will be positive between $40 to $50 million for the fourth quarter and will narrow the full year EBITDA loss to -$50 to -$40 million. The revised full-year forecast compares to the previous guidance of -$73 to -$45 million.

eHealth will actually report its first profitable net income quarterly result for the year of $16 to $21 million in the final quarter of 2022. Full year net losses will now be somewhere in the range of -$93 to -$88 million, improving from the prior forecast of -$115 to -$92 million.

Analyst Jonathan Yong from Credit Suisse said that the results highlighted strong outperformance when compared to e-broker peers. Yong believes the quarter marks a turning point for the brokers after a period of elevated costs which pushed stocks down significantly over the last 12 months.

Data highlighted on the Fintel platform revealed a spike in call option buying activity the week before the announcement occurred.

Last week on Tuesday the 17th of January, $26.6 million of net long premium was bought from a spike in call premium. This compares to $43.6 million of net premium bought on the ACTUAL news.

On the 17th call volume (708 vol) was 382.70% higher than the 20-day average and was also 306.94% higher on the 18th (663 vol).

eHealth’s CEO Francis Soistman also bought stock during the fourth quarter after likely realising how the strong business momentum would flow through to the final year print.

Soistman in the approved trading window bought 80,000 shares at $3.08 each with a total transaction value of $247,000.

The CEO has profited from a return of more than 130% with shares currently trading above $7.

Fintel journalists summarised the CEO’s trades with an update on the company back in  November.
Market expectations for 2023: 

With the first month of 2023 almost behind us already, it is worth highlighting market expectations for the year before management provides its official update during the full result conference call in March.

Analysts expect sales will grow by around 5% to around $418 million.

EBITDA and net income losses are expected to narrow further to -$40 million and -$62 million respectively.

This article originally appeared on Fintel