SelectQuote Reports Better Than Expected Q3 Earnings

• SelectQuote, Inc.'s (NYSE:SLQT) stock price is significantly higher than its target price, indicating a negative growth potential of -36.29%.
• Comparatively, Erie Indemnity Company (ERIE) and eHealth, Inc. (EHTH) also face negative growth potentials, with ERIE showing a more substantial decline.
• Huize Holding Limited (HUIZ) presents a positive growth potential of 8.46%, contrasting with the negative outlooks of its peers.

SelectQuote, Inc. (NYSE:SLQT) is a prominent player in the insurance solutions sector, focusing on life, auto, and home insurance. Despite its efforts to make a mark in the insurance market, SLQT's current stock price of $4.38 overshadows its target price of $2.79, suggesting a negative growth potential of -36.29%. This significant discrepancy has led to a pessimistic outlook from investment analysts, resulting in the stock being excluded from coverage.

When comparing SLQT to its peers, Erie Indemnity Company (ERIE) exhibits a more pronounced negative growth potential of -49.41%, with a stock price of $404.88 and a target price of $204.84. Despite this, ERIE maintains a robust market cap of $18.70 billion and a PE ratio of 34.68, indicating a relatively stable financial position compared to SLQT.

eHealth, Inc. (EHTH) also encounters a negative growth potential of -32.88%, with a stock price of $9.53 and a target price of $6.40. EHTH's market cap is significantly lower at $282.41 million, and it has a negative PE ratio of -8.66, which may reflect financial challenges similar to those faced by SLQT.

Arthur J. Gallagher & Co. (AJG) and Brown & Brown, Inc. (BRO) both face negative growth potentials of -38.52% and -3.86%, respectively. AJG's high PE ratio of 49.85 and BRO's PE ratio of 28.97 suggest that these companies are valued more optimistically by the market compared to SLQT, despite their negative growth outlooks.

Among SLQT's peers, Huize Holding Limited (HUIZ) stands out with a positive growth potential of 8.46%, with a stock price of $3.23 and a target price of $3.50. HUIZ's low PE ratio of 1.14 and small market cap of $1.49 million indicate a different market perception, potentially offering a more favorable investment opportunity compared to SLQT.

SelectQuote, Inc. (NYSE:SLQT) reported its Q3 earnings results last week, which came in well above the Street estimates driven by improved operating efficiency from management’s strategic redesign.

Revenue came in at $299.4 million, beating the Street estimate of $260.7 million, driven by better-than-expected volume with approved MA policies of 165,000. Improved close rates from longer-tenured agents using higher quality, targeted leads led to a 17% improvement in marketing expense per approved policy.

The company continues to gain solid adoption with SelectRx, with membership growing 14.5% sequentially to around 45,000.

SelectQuote, Inc. (NYSE:SLQT) shares were trading more than 9% lower Wednesday morning followed by a 10% drop yesterday, driven by the company’s Q2 earnings miss.

Q2 EPS came in at ($0.64), worse than the Street estimate of ($0.17). Revenue was $139.4 million, missing the Street estimate of $200.55 million.

While the full 2023-year guidance fell short of expectations, analysts at RBC Capital noted that the preemptive Q4 tail adjustment and conservative loan-to-value (LTV) assumption should de-risk the outlook.

The analysts were encouraged that lower marketing spend industry-wide may be rationalizing shopping behavior and fostering higher persistency. Furthermore, reduced turnover and higher agent tenure bode well for AEP productivity. The analysts lowered their price target on the company to $2 from $3, while reiterating their sector perform rating.