– eHealth is a digital health insurance broker with secular tailwinds from the continued Medicare Advantage growth till 2040.
– EHTH was classified as an un-investable stock in an un-investable industry on top of a damning short report from Muddy Waters.
– Report pointed to low-quality earnings due to mandatory ASC606 adoption and abusing its constraints with aggressive growth tactics
– EHTH is in a turnaround mode with new mgmt, reversing bad growth policies and industry players behaving more disciplined.
– Churn is expected to stabilize back to normalized levels.
– 100% upside opportunity protected by a floor valuation.
– The liquidation value of the commissions receivables is higher than the current market cap.
– Depending on the assumed churn levels, the stock has 70% upside in the base case and 400% upside for the bull case.
– The BV of commissions receivables is $25.38/share after net debt and preferred.
Exp. gain: +70% to +400%
Full write-up (free guest account required):