What happened

Shares of online insurance marketplace EverQuote (NASDAQ:EVER) collapsed in Tuesday morning trading, dropping 15.6% through 11:10 a.m. EDT after the company released preliminary numbers for its third-quarter 2021 earnings report -- what's colloquially known as an "earnings warning."

So what

Heading into Q3, analysts have been forecasting EverQuote would lose $0.15 per share on sales of $110.2 million for the September quarter, or about $3.4 million in total. Instead, EverQuote says investors should now anticipate that its losses when calculated according to generally accepted accounting principles (GAAP) will be closer to $5.5 million or even $6 million (about $0.26 per share) and on sales of only $106.5 million to $107.5 million -- about 3% short of expectations.    

EverQuote blamed "challenges in the auto insurance market," and in particular "higher than expected claims losses" at "several of our key carrier customers." Facing these losses, the customers spent less on marketing (i.e., spent less on EverQuote's services) than EverQuote had anticipated.

Investor holds head in dismay in front of a stock chart showing a red arrow going down

Image source: Getty Images.

Now what

The good news is that EverQuote thinks "these industry dynamics are temporary in nature and will correct as carriers adjust their pricing policies to a new underwriting environment." Moreover, the problems seem limited to auto insurers, and EverQuote expects "our non-auto verticals to be unaffected by these challenges."

In the meantime, however, the company's having to "streamline our operations," cut expenses, and endure steeper losses than expected.

It's no wonder investors are disappointed today.

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