Today investors in Select an offer (NYSE:SLQT) show dramatic declines. In fact, at the time of writing, SLQT stock is down more than 40% on very high volumes. More than 23 million shares are currently traded, compared to the usual 1.3 million shares daily.
This move follows on from today’s earnings report, which investors and analysts seem to have missed. The company reported seemingly solid numbers. Revenue grew 76% year over year to $ 406 million. And the company reported a compound annual growth rate (CAGR) of 67% for the past two years.
However, investors seem to be looking more forward than backward. Finally, each share is valued based on the discounted stream of future cash flows. Some comments from the SelectQuote management team during the conference call on the results called for criticism of where this company could go from here on this front.
Analysts are among the strongest critics of SelectQuote. Today, two analyst downgrades led to the decline. Let’s see what analysts see in this stock that worries some investors.
SLQT share down due to analyst downgrades
SelectQuote has been a pioneer in the direct consumer price comparison business for a long time. This company was founded in 1985 to look for stock markets during the pandemic last year.
Today’s sharp decline brings the SLQT share to its lowest level since it was listed on the stock exchange. This decline appears to take into account some rather bearish comments from analysts who see no strength in SelectQuote’s ability to grow at these rates going forward.
Meyer Shields of Keefe, Bruyette & Woods points out that lower persistence combined with the rather weak guidance from SelectQuote is worth a significant downgrade. This analyst had previously tied SLQT stock to a price target of $ 30. Shields lowered that target to $ 13.50 and downgraded the stock from Outperform to Market Perform.
In addition, Frank Morgan of RBC Capital Markets lowered his price target from $ 33 to $ 13. He also lowered his rating from a “Buy” to the equivalent of “Hold”.
These analysts appear to believe that policyholder churn is likely to affect SelectQuote’s future cash flow projections. Since it is not currently generating positive free cash flow, these analysts assume that the company will not generate positive FCF until later. Today, investors appear to be on the same page, bidding this stock well below the $ 13-13.50 level, roughly where this stock was trading yesterday.
At the time of this writing, Chris MacDonald held (neither directly nor indirectly) positions in the securities discussed in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.