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Why GoHealth Stock Slumped Today

By Evan Niu, CFA – Aug 20, 2020 at 1:32PM

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The health insurance company swung to a net loss in the second quarter.

What happened

Shares of GoHealth (GOCO -1.11%) slumped today, down by 12% as of 12:25 p.m. EDT, after the company reported second-quarter earnings. The health insurance specialist swung to a net loss despite a jump in revenue.

So what

Revenue in the second quarter increased 71% to $127.1 million, which was ahead of the $124.2 million in sales that analysts were expecting. That resulted in a net loss of $22.9 million, compared to a net profit of $15.3 million a year ago. The health insurance company said its LTV/CAC (lifetime value of commissions per customer acquisition cost) for its Medicare-Internal segment increased from a ratio of 2.3 to 2.7 during the first half of 2020.

A billing statement with a stethoscope on top

Image source: Getty Images.

"Our strategic focus on LTV/CAC ensures that these high rates of growth convert into industry-leading margins and strong cash returns," CEO Clint Jones said in a statement. "Given the trajectory of our business and the investments we have been making in our direct-to-consumer marketplace, we believe we are on track for another record year of results in fiscal 2020."

Now what

GoHealth warned that the COVID-19 pandemic is creating macroeconomic uncertainty and that the trajectory of the U.S. economy is difficult to predict at this time. However, the company still issued guidance for the year that calls for revenue of $840 million to $890 million. The consensus estimate is currently pegged at $859.7 million in revenue this year. Adjusted EBITDA in 2020 is forecast at $265 million to $290 million.

Morgan Stanley reiterated an equal weight rating on GoHealth and raised its price target up a buck to $18.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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