Both Clover Health Investments (NASDAQ:CLOV) and Senseonics Holdings (NYSEMKT:SENS) have emerged as meme stocks over the last few months. Senseonics has been the much bigger winner so far, but that doesn't necessarily mean it will continue to outperform Clover Health going forward. In this Motley Fool Live video recorded on July 7, Motley Fool contributors Keith Speights and Brian Orelli discuss which of these two meme stocks is the better pick right now.
Keith Speights: Meme stocks are just all the rage these days, so let's jump briefly on that bandwagon. Two super-hyped meme stocks in the healthcare sector right now are Clover Health -- ticker there is CLOV-- and Senseonics Holdings. Ticker there is SENS.
Brian, I know you recently had an interesting experience with options you have for Clover, but if you had to pick between these two meme stocks right now, which one would you go with and why?
Brian Orelli: I'm still technically a shareholder of Clover because I had an odd lot, so options cover 100 shares, and I had multiples of 100 plus 19 additional shares. So I have 19 shares that didn't get called away.
If people didn't remember the story, basically I sold a covered call on Clover and it rocketed higher, so I sold them. I was forced to sell them at a much higher price than I bought them at, but a much lower price than I would've liked to have sold them at because it had rocketed higher. Then I didn't have time to sell those 19 shares, although obviously 19 shares isn't a whole lot of money [laughs] because I was under restrictions.
Then at this point, I'm just holding onto them as a reminder not to sell covered calls and make some people hold onto their losers that are penny stocks just as a reminder that maybe you should think a little bit more about your purchases before you buy the stock while I'm holding onto my 19 shares to remind me not to sell covered calls on things that could eventually become meme stocks.
Clover's almost a double where last time I looked and where I bought it. Not much has changed with the company, so I'm not really all that interested in adding at this level. I'd like to see it drop a little more or maybe prove that it's able to lower costs for Medicare patients, that's the business they're in. If they can do that, then I'd be willing to buy even at a higher price if I felt like there was less risk.
Moving on to Senseonics, this company sells Eversense continuous glucose monitors. They stay on for 90 days, which is much longer than other glucose monitors, but it has to be inserted by a doctor. They're working with the FDA to get a version approved that can stay on for 180 days.
Obviously, you have to go in every three months versus every six months to your doctor, that would be a big improvement. But it hasn't really been a big seller, I think mostly because you have to go in to get your doctor to insert this.
In the first quarter, sales were less than $3 million. That was primarily in Europe. Revenue in the U.S. was $0.3 million. They have a new sales contractor, and so they're hoping that the contractor will be able to boost their sales. But it's still not expecting to ramp up revenue all that quickly in 2021. Revenue is only expected to be $12 to $15 million, that puts it at trading at 97 times sales at the top of that range.
This is a competitive space, Abbott is a powerhouse in the continuous glucose monitoring, so is Medtronic and then DexCom. It's a smaller company, but it has two billion in annual sales and trades at around 20 times trailing-12-month sales. Compare that to the valuation of Senseonics, which is like almost 100 times future sales.
I think that it's hard to see a value play here. Maybe the new contracts with the company that they're contracting to help boost sales will help.
But this is one where I'd rather wait and see. Maybe it ramps up sales to 100 million and you lose some upside as it ramps up, but you gain a lot of confidence if they can get to a 100 million in sales, and then that makes it less risky. I'd rather buy at a $100 million in sales and lose a heck a lot of upside from here, but buy it where it's a lot less risky.
Long story short, I'm not sure I really buy either of these at the current valuation. Clover is probably the better choice, but that's probably mostly because I'm more familiar with the company. I think it's probably closer to the valuation that I would be interested in rebuying the company.