The Engine Boosting Clover Health Stock is a CTO working to disrupt Medicare

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When Clover Health Investments (NASDAQ:CLOV) first became public, all attention was focused on its sponsor, Chamath Palihapitiya. The CLOV share was just the latest in a series of its initial public offerings with a blank check.

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I was among those who piled up. I called him the PSPC Great Gatsby, the real Professor Harold Hill.

But now that CLOV shares have been on the market for some time, attention should turn to CTO Andrew Toy and Assistant Clover. It’s what the company has always been about, using technology to lower primary care costs for people with Medicare.

Clover Assistant is a clinical support platform built within a managed care business.

Toy’s theory is this: Three quarters of health care costs come from managing chronic conditions like diabetes and high blood pressure. This is especially true for people over 65. If actionable data is in the payment system, primary care physicians will focus on it. This will align the incentives between those who pay the bills and those who accumulate them.

Toy, from Hong Kong who sold his first start-up to Alphabet (NASDAQ:GOOGL), sees Clover Assistant as a bridge between patients and their doctors. At the height of the pandemic, he says, Clover Assistant has helped policyholders stay at home through telehealth and post office pharmacies. Then it helped them access vaccines. Clover created a Video on Wheels program to provide patients with iPads for these virtual tours.

The best thing the government can do to reduce health care costs, Toy now believes, is to provide inexpensive broadband service to everyone.

A difficult start for CLOV Stock

After Clover went public, I focused on his early dealings with Walmart (NYSE:WMT). This included a co-branding deal meant to grab attention and customers.

It was designed to capture data and experience, which Clover has used to offer Medicare Advantage plans in nine states. The 2022 registration period ends on December 7. The assistant is integrated into these plans, which do not include any co-payment for primary care visits. The idea is that doctors can optimize care, thanks to the assistant, because patients use it to stay in touch with the healthcare system.

Medicare Advantage providers focus on selling patients through advertising. This year, Clover is taking another route to the market, contracting directly with home care providers. If the Clover model cuts costs and improves results, the entire medicare market is open to it.

Clover figures emerge

Clover is just starting to generate significant revenue, worth around $ 1.5 billion in 2021. Analysts expect that figure to climb to $ 2.64 billion next year. This makes the market cap of $ 2.4 billion reasonable.

Remember, this is a health insurance stock, not a technology stock. UnitedHealth Group (NYSE:A H), the most successful American health insurer, reports less than 6% of its turnover to its net income.

While part of Clover’s talk is focused on cutting costs, the goal of cutting costs is to create margins. But if Clover could match UNH’s profitability next year, that $ 2.64 billion in revenue could generate nearly $ 160 million in net income. If you buy the CTO Toy argument, in other words, you only pay 15 times next year’s profit for the stock now.

The bottom line

Clover’s past as a SPAC stock and as an even stock will likely keep its price low for some time. Since the stock debuted on January 8, the price has fallen by almost two-thirds. I doubt it will turn around until there’s proof of Toy’s case.

Although Clover’s revenue increased to $ 522 million in the third quarter, operating cash losses declined to just $ 45 million in the last quarter.

Clover is still selling stocks. Its next report is due for release on February 8, after exceeding the estimates in its last report. Analysts call it a “sale.”

But I love what Andrew Toy does. It fits in well with my own reporting from the 2000s, when I ran a health IT beat at ZDNet. Don’t tell Chamath I said this, but Clover Health is now an intriguing speculation.

As of the publication date, Dana Blankenhorn does not hold any positions in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.

Dana Blankenhorn has been a financial and tech journalist since 1978. Just in time for the holidays, he has a collection of COVID-19 stories on the Amazon Kindle store. Write to him at [email protected] or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets and politics.

The article The Engine Boosting Clover Health Stock is a CTO working to disrupt Medicare first appeared on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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