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Bear of the Day: eHealth (EHTH)

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eHealth, Inc. (EHTH - Free Report) is the parent company of eHealthInsurance, the leading online source of health insurance for individuals, families and small businesses.

eHealth and its technology were responsible for the nation's first Internet-based sale of a health insurance policy. eHealthInsurance presents complex health insurance information in an objective, user-friendly format, enabling the research, analysis, comparison and purchase of health insurance products that best meet consumers' needs.

Q4 and Guidance Take Estimates Down

On February 24, eHealth reported a Q4 GAAP loss per share $0.91. Revenues were $43.8 million, a decrease of 13% compared to $50.1 million for the fourth quarter of 2015.

The net loss for the quarter was $16.7 million compared to $12.1 million the year ago quarter.

The company projected that the fiscal year total revenue is expected to be in range of $165 million to $175 million and they are expected to report significant EBITDA loss this year.

The earnings guidance was for a non-GAAP net loss EPS in range of $1.49 to $1.59.

The company also forecasts plans to return to break-even in 2018, generate low double digit margins in 2019, and 20%+ margins in 2020 and thereafter.

These results and guidance propelled analysts to take down EPS estimates for this year and next. The 2017 Zacks consensus dropped from a GAAP loss of 63-cents to a loss of $1.02.

And 2018 profit projections fell from a profit of $0.07 to a loss of $1.37. This is only from one analyst, so the magnitude of the swing may not be as great, but the general trend is clear.

What About the Repeal of the ACA?

There's a lot of uncertainty right now about the GOP repeal of Obamacare. Some analysts are nonetheless trying to see through the fog.

SunTrust analysts commented last week that they believe changes to The Affordable Care Act (ACA) under the Trump administration could be a potential catalyst for EHTH.

The key lies in the transition to more of eHealth's insurance business relying on Medicare. The company is making increased investments in its Medicare business, which has high customer acquisition costs but is ultimately more profitable over the long term than the Individual and Family Plan (IFP) business.

Until we know more from Washington and the impacts on eHealth, it may be best to stay on the sidelines with the company's shares. The Zacks Rank will let you know when the coast is clear.

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