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Is It Too Late to Buy SelectQuote Inc. Stock?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
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SelectQuote Inc.’s stock price surged on Tuesday, trading up by 10.38 percent, buoyed by strong public sentiment. Key news driving this positive momentum includes the company’s recent announcement of a significant expansion in their insurance offerings and improved quarterly earnings. These developments have bolstered investor confidence, leading to a notable uptick in the company’s market performance.

Recent Developments

  • SelectQuote’s Q4 results show a revenue of $307.21M, exceeding forecasts.
  • The company anticipates FY25 revenue between $1.4B and $1.5B, below consensus.
  • New fulfillment center for SelectRx Pharmacy in Olathe marks strategic expansion.
  • Despite higher revenue, SelectQuote shares drop over 20%.
  • SelectQuote securitizes commissions receivable for $100M to optimize its balance sheet.

Candlestick Chart

Live Update at 16:43:31 EST: On Tuesday, September 17, 2024 SelectQuote Inc. stock [NYSE: SLQT] is trending up by 10.38%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

SelectQuote’s Recent Earnings Report

The company, SelectQuote Inc., has had quite a mix of news lately that’s stirring the market waters. Their Q4 results were a bright spot: revenue hit $307.21M, topping the anticipated $272.95M. That’s a sizeable gap, showing the company knows how to exceed expectations. But, don’t let those numbers alone fool you.

This upward tick has its downside. The optimistic revenue figures were shadowed by a net loss in Q4, with EPS falling to (18c), underperforming the expected (15c). Although there was an 17% boost in revenue, blended with a 26% rise in Adjusted EBITDA, suggesting improved operational efficiency, the overall financial health remains a mixed bag.

Amidst the flurry of financial data, the intriguing part lies in how SelectQuote is maneuvering its assets. A new fulfillment center for SelectRx Pharmacy in Olathe, Kansas, is in the pipeline. Stretching across 54,000 square feet, this state-of-the-art facility will bolster their full-service medication management across the US. Since its launch in 2021, SelectRx membership leapt from 5,000 to over 75,000 members—a testament to the company’s growing footprint in healthcare services.

From the stocks side, SelectQuote’s performance has been far from steady. Just a week ago, the shares plummeted over 20% right after the company announced its results, despite showing a narrower net loss of $0.18 per diluted share, down from $0.29.

Decoding SelectQuote’s Financials

Digging deeper into their recent numbers, the financial statements from December 2023 paint a varied picture.

Key Ratios

  • Profit Margins: Notably, SelectQuote’s EBIT margin stands at 2.7%, with EBITDA margin a bit healthier at 4.9%. However, negative pretax profit margin (-2.6%) and the profit margin reported as -4.33% indicate that despite revenue growth, profitability remains a concern.

  • Valuation Measures: The price-to-sales ratio at 0.27 and the price-to-book ratio at 1.02 highlight that the stock is not highly priced; in contrast, the price-to-cash flow sitting at -3.3 should prompt some worry.

Financial Strength

  • Debt Levels: The total debt-to-equity ratio of 2.15 indicates significant leverage, while the current ratio of 2.1 provides a bit more optimism on the liquidity front. Yet, long-term debt weighs heavy on the company’s books.

  • Efficiency: Return on assets and equity are disquietingly negative at -4.03% and -12.54% respectively, questioning the company’s capital efficiency and profitability.

These figures hint at SelectQuote’s strategy of reinvesting heavily, especially noted through initiatives like the new SelectRx facility. Operationally robust yet financially strained, the prospects hinge on improving margin figures and optimizing their capital structure.

More Breaking News

Impact of Recent Financial News

SelectRx Expansion:

The construction of a new fulfillment center for SelectRx Pharmacy is a strategic move aiming to scale operations and enhance their service network. This expansion underscores the company’s ambition to solidify its presence in the healthcare sector, potentially driving future revenue growth and better consumer engagement.

Q4 Earnings Impact:

The mixed responses to Q4 earnings highlighted vibrant revenue but flagged growing concerns over persistent losses. These results influenced a bearish sentiment leading to a sharp stock price decline despite the favorable revenue figures.

Fiscal Year 2025 Forecast:

The expectations for FY25 reveal anticipated revenues ranging between $1.4B and $1.5B, yet failing to meet the consensus estimate of $1.53B. The anticipated net loss of $31M further complicates the outlook. But, the revenue growth trajectory and SelectRx’s expansion may stabilize long-term sentiment.

Commissions Receivable Securitization:

The company’s tactical move to secure $100M through the securitization of commissions receivable reflects a conscious effort to restructure its balance sheet. This maneuver could provide much-needed financial flexibility but underlines the pressing need to address cash flow challenges.

Understanding Market Dynamics

The journey of SelectQuote’s stock has been anything but straightforward. One could liken it to charting a vessel through rough seas. Occasional revenue peaks signal potential, yet recurrent losses and a volatile market response mirror the turbulence met along the way.

Analyzing recent chart data (YYMMDD format):

plaintext
Date: Open High Low Close
240917: 1.88 2.1 1.76 2.07
240916: 2.08 2.08 1.79 1.83
240913: 2.54 2.68 1.92 2.02
240912: 3.55 3.655 3.4 3.59
240911: 3.4 3.61 3.37 3.51

A glance at these figures instantly reveals the volatility. On 24 Sep, 17, the stock dipped to a low of $1.76 but managed to close at $2.07, showing overall resilience despite a downward sway in the preceding sessions.

From the five-minute intraday candle chart:

plaintext
Time: Open High Low Close
17:25: 2.03 2.03 2.03 2.03
17:10: 2.02 2.02 2.02 2.02
16:40: 2.01 2.02 2.00 2.00
16:15: 1.98 2.05 1.98 2.05
14:45: 2.025 2.0288 2.02 2.0211

The movement within the trading day reflects tight margins yet indicates a struggle to maintain higher grounds. Traders like Punam, who look for brief windows of opportunity, may find these intraday swings tempting. However, for investors, the horizon appears challenging.

Will The SelectQuote Inc’s Stock Find Stability?

To comprehend whether it’s too late to buy SelectQuote’s stock, we have to consider both the present landscape and future outlook. Here are some takeaways:

Prospects Based on Key News:

  • Revenue Growth: The continuous increase in the revenue, driven significantly by the Senior and Healthcare Services segments, suggests growth potential despite the quarterly losses.
  • Strategic Investments: The development of new facilities like the SelectRx Pharmacy center will likely generate future returns and enhance customer service.
  • Market Maneuvering: Efforts to securitize receivables and optimize the balance sheet are calculated steps toward ensuring financial health.

Concerns Looming Over:

  • High Volatility: The sharp fluctuations reflected in both daily closes and intraday activity indicate a high-risk environment.
  • Profitability Issues: Persistent net losses and negative returns on equity and assets raise serious questions about long-term sustainability.
  • Debt Levels: The substantial debt, despite liquidity measures, continue to burden the financial structure of the company.

In the grand tapestry of market activity, SelectQuote embodies the close interplay of potential and caution. Investors might view the stock through varied lenses—short-term gains riding on fresh revenue figures or long-term gains from strategic expansions. Yet, the specter of losses and heavy leverage lurks.

Conclusion: Navigating the SelectQuote Journey

So, is it too late to dive into SelectQuote Inc.’s stock pool? Like any journey, the answer isn’t clear-cut. For those who embrace the tempestuous waters of volatility with an eye for short-term profits, the current drops offer opportunities. Meanwhile, visionaries tracking the strategic future investments may find reasons for guarded optimism, betting on revenue strides and sector advancements.

Balancing between thrill and a steep drop can be precarious. Thus, whether you’re an investor steering through waves of speculation or a cautious sailer seeking safety in slow returns, stay informed, and keep your compass steady. The tide for SelectQuote is ever-changing, and in this voyage, charting your own path might be the wisest call.

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”