eHealth Inc (EHTH) operates, the nation's first and largest private health insurance exchange where individuals, families an...

Weekly Superstock Scan 16 May2016 - 20 May 2016: EHTH

eHealth Inc (EHTH) operates, the nation's first and largest private health insurance exchange where individuals, families and small businesses can compare health insurance products from leading insurers side by side and purchase and enroll in coverage online. eHealth also offers educational resources and powerful online and pharmacy-based tools to help Medicare beneficiaries navigate Medicare health insurance options, choose the right plan and enroll in select plans online through various online platforms.


EHTH has formed a long flat base since the start of the year. Three weeks ago, when EHTH reports their 1Q2016 results, price broke out from the long flat base with close to four times average weekly volume.

Price continue to creep up with lower volume in the two weeks following.


Individual and Planning Plan (IFP) Cost Cutting Measures

Due to the Affordable Care Act, the marketplace has changed since 2013 and EHTH has been hit hard as IFP membership andcommission fell drastically. EHTH has made a strategic decision to manage the IFP for profitability, i.e. they will not pursue application growth at the expense of higher acquisition cost. 

The decision has paid off as operating cost declined both in absolute terms and as a percentage of revenue compared to 1Q2015. EHTH is expecting IFP to be highly profitable again in 2016.

Medicare Expected to be Main Revenue Contributor in 2016

In contrast to the IFP business, the Medicare business continues to gain momentum with strong double-digit growth in submitted applications, estimated membership and revenues. In 1Q2016, submitted applications for Medicare Advantage and Medicare Supplement products were up 53% and 47% year on year respectively.

Their strategy is to aggressively pursue the Medicare market to gain market share and are expecting revenue from the business to exceed revenue from the IFP business in 2016.

Risk Factors/ Things I do not Like

  • Seasonality - As the vast majority of Medicare renewal revenues fall to the bottom-line, the first quarter is seasonally strongest both in terms of revenue and profitability. The revenue from the second and third quarter is a much smaller percentage of the annual revenue. Therefore even if EHTH reports good results in the next two quarters there may be little impact to the stock price.
  • Regulations - We have seen how the Affordable Care Act almost tear the company apart since 2013. Depending on the outcome of the upcoming Presidential Election, there may be further change to the healthcare acts which will impact EHTH's profitability.

Potential Trade Setup

I will be waiting for a low risk entry; either closing tight with low volume for consecutive weeks, or support at a magic line.


Previous Superstocks

GDEN (Posted on 16th Apr 2016 Watchlist)
Continue to go up, pending pullback.

EXFO (Posted on 10th Apr 2016 Watchlist)
Entered @ 3.8, supported by 10wMA

BORN (Posted on 3rd Apr 2016 Watchlist)
30wMA served as support, results out this week.

ELMD (Posted on 3rd Apr 2016 Watchlist)
Entered @ 4.2 and sold @ 4.05. Closed below 10wMA on poor results.

PLPM (Posted on 27th Mar 2016 Watchlist)
Closing tight but on relatively high volume, may enter at 10wMA.

ATSG (Posted on 13th Mar Watchlist)
Broke below 10wMA, removing from watchlist

SNC (Posted on 6th Mar 2016 Watchlist)
Entered @ 11.95. Supported by gap? To exit if weekly close below 11.

JRJC (Posted on 14th Feb 2016 Watchlist)
Looking to buy at upward trendline and 10wMA in the 5 region. 

EDUC (Posted on 24th Jan 2016 Watchlist)
Entered @ 9.95.

VRA (Posted on 11th Jan 2016 Watchlist)
Entered @ 14.4 and Exited at 17.25. Hit 30wMA with no signs of support.

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