EHTH: Covering the Short (Removing from Best Ideas List)

Takeaway: We added EHTH Short to our Best Ideas List on 2/7/14. Our bearish thesis remains largely intact, but we're out of catalysts until 1Q15.

KEY POINTS

  1. NOTHING HAS REALLY CHANGED: The only material positive news from the 3Q14 earnings call was that IFP commission rates are expected to remain the same in 2015; pushing back an inevitable downside catalyst to 2016 at the earliest.  But the same risks that crippled the business in 2014 remain into 2015.  EHTH still has limited connectivity with the public exchanges (a requisite to selling subsidized plans), which means EHTH may not have the ability to drive enough new account growth to offset its churning IFP members.  All things considered, the setup hasn't changed much from 2014; EHTH could see another down year in IFP membership next year.  
  2. BUT WE'RE OUT OF CATALYSTS UNTIL 1Q15: Open Enrollment runs from 11/15/14-2/15/14.  EHTH will not really know what 2015 will look like until 1) it starts collecting premiums on its new members, and 2) it knows how many of its current members have churned.  The company will issue its 2015 guidance before that occurs, which means that can go either way since it won't really understand its 2015 prospects until its 1Q15 earnings release.  Until then, remaining short could expose us to near-term bullish catalysts on immaterial events (e.g. random news flow similar to last year).  Given that the stock is up following cautiously optimistic management commentary for 2015, we would rather book the gain and get out of the way...for now.

EHTH: Covering the Short (Removing from Best Ideas List) - EHTH   Net Member Growth 3Q14

 

Let us know if you have any questions or would like to discuss in more detail. 

 

Hesham Shaaban, CFA

@HedgeyeInternet

 

 

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more