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Why EverQuote Tumbled Yesterday

By Rich Duprey – Nov 3, 2021 at 8:37AM

Key Points

  • The reopened economy has drivers hitting the roads again in greater numbers, increasing claims.
  • Everquote's platform is facing challenges as carriers begin repricing their policies.
  • The online-insurance marketplace sees the rest of its non-auto policy business unaffected.

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The auto-insurance market is rapidly readjusting to consumers driving more miles again.

What happened

Shares of EverQuote (EVER -0.25%) closed down more than 12% yesterday after the online-insurance marketplace reported third-quarter results that missed Wall Street expectations and narrowed its outlook for the full year. Analysts responded by either lowering their price targets on its stock or reducing their ratings from buy to hold.

So what

Although EverQuote reported a 20% increase in revenue to $107.6 million, it was below projections of $109.9 million as challenges in the auto-insurance underwriting market continued to vex the insurance platform. 

Although management believes the situation will correct itself over time as carriers adjust their pricing strategies to take into account the new underwriting environment, EverQuote was forced to better align its cost structure with what it's seeing in the marketplace. As a result, it implemented an approximate 10% structural reduction in non-marketing operating expenses.

Two people on their cell phones next to their cars, which were involved in a fender bender.

Image source: Getty Images.

EverQuote also made organizational changes that consolidated leadership positions and streamlined the decision-making process. The online-insurance marketplace believes the moves better position the company for growth when the auto-insurance industry recovers.

EverQuote noted its non-auto insurance verticals are unaffected by the challenges facing the auto market and expects its health vertical, in particular, to have a strong fourth quarter.

Now what

Wall Street remains hopeful that EverQuote will still be a growth stock in the future, but it's going to take a little longer than previously expected. Analysts at JPMorgan reduced their rating on the stock from overweight to neutral because, as people began driving again, claims would rise and carriers would have to adjust pricing. Its price target was slashed from $41 to $17.

Others were not so drastic, though just as cautious. Cannacord lowered its target from $25 to $30, while Raymond James dropped its target from $41 to $26 per share.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Rich Duprey 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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