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Why eHealth Shares Imploded

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Internet-based health insurance provider eHealth (NASDAQ: EHTH  ) plunged as much as 22% after it fell short with its fourth-quarter earnings report and its 2013 full-year guidance.

So what: For the quarter, eHealth reported an adjusted profit of $0.18 as revenue rose just 5% to $45.1 million. Wall Street's expectations had been calling for a profit of $0.21 on revenue of $46.8 million. eHealth blamed the conversion to a direct marketing model from a referral-based model for its Medicare business as the reason for the weak revenue growth. Furthermore, eHealth forecast full-year EPS of $0.61 to $0.71 in 2013 versus the Street's expectation of $0.76.

Now what: With individual states setting up their own competitive insurance markets in anticipation of the implementation of the Affordable Care Act in 2014, eHealth's revenue growth may continue to experience hiccups. Being that it was already valued very generously prior to today's earnings flub, I would take the miss as all the more reason to ditch Internet-based insurers like this for an industry "dinosaur" health-benefits provider that is trading on the cheap, like WellPoint.

Craving more input? Start by adding eHealth to your free and personalized Watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in insurers like eHealth, the best investing approach is to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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9/29/2016 2:45 PM
EHTH $11.09 Up +0.01 +0.09%
eHealth CAPS Rating: *