Why eHealth Shares Imploded


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Internet-based health insurance provider eHealth plunged as much as 22% after it fell short with its fourth-quarter earnings report and its 2013 full-year guidance.

So what: For the quarter, eHealth reported an adjusted profit of $0.18 as revenue rose just 5% to $45.1 million. Wall Street's expectations had been calling for a profit of $0.21 on revenue of $46.8 million. eHealth blamed the conversion to a direct marketing model from a referral-based model for its Medicare business as the reason for the weak revenue growth. Furthermore, eHealth forecast full-year EPS of $0.61 to $0.71 in 2013 versus the Street's expectation of $0.76.

Now what: With individual states setting up their own competitive insurance markets in anticipation of the implementation of the Affordable Care Act in 2014, eHealth's revenue growth may continue to experience hiccups. Being that it was already valued very generously prior to today's earnings flub, I would take the miss as all the more reason to ditch Internet-based insurers like this for an industry "dinosaur" health-benefits provider that is trading on the cheap, like WellPoint.

Craving more input? Start by adding eHealth to your free and personalized Watchlist so you can keep up on the latest news with the company.

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The article Why eHealth Shares Imploded originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of WellPoint. Motley Fool newsletter services have recommended buying shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published