What happened
Shares of insurtech start-up Bright Health Group (BHG 5.04%) rose 29.5% this week, according to data from S&P Global Market Intelligence. The shares, which closed at $3.36 on Friday, rose to a high of $4.66 on Wednesday. The company's stock just had an initial public offering in June, and is well down from its June high of 17.93 but above its low of $3.07, which it hit last Friday.
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So what
Bright Health gave updated guidance on its expected 2022 revenue on Tuesday, and it was a pleasant surprise. The company focuses on retail, consumer-based medical care. It has a segment, NeueHealth, that operates clinics and another, Bright HealthCare, that offers health plan products such as individual, employer-sponsored, and Medicare plans. The company said in an investor report that it expected revenue of $6.3 to $6.5 billion in 2022, up more than 54% over what it expects to have this year.
The company isn't profitable, but it has shown strong growth. In the third quarter, the company reported that through nine months, it had revenue of $3 billion, up from $847 million in the same period last year. It also said in its investor report that it was on track to post 2021 revenue of $4.1 billion to $4.2 billion. However, it also reported a nine-month net loss of $364 million, up from an $84.6 million loss, year over year.
Now what
At this stage in the young company's growth cycle, investors are most interested in whether the company is increasing revenue and growing subscribers, and it is certainly doing that. As of August, it was in 131 markets in 17 states; the company said it expects to enter 42 new markets in 2022. On Monday, Bright Health announced that in order to continue to grow, it had secured a $750 million capital investment that includes funding and expertise from Cigna Ventures. New Enterprise Associates, the biggest shareholder in Bright Health, is also a co-investor in the deal.
The healthcare insurer stock has great long-term potential, but like any start-up, carries plenty of risks -- particularly as it is in a competitive field littered with larger insurers and other start-ups such as Clover Health Investments and Oscar Health. Bright Health said it expects to have break-even adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024, so investors may want to be patient.
