eHealth Earnings Preview: First Quarter 2009

eHealth [[EHTH]] is expected to report their first quarter 2009 results after the market closes on Tuesday, April 28. Based on our analysis, we at are expecting EHTH to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $31.7 million and EPS of $.13. This would represent a 21% increase in revenues from last year’s $26.3 million in the same period. The current analyst consensus estimates calls for revenues of $31.5 million and $.12 EPS. On February 12, the company provided full year 2009 revenue guidance of $131 – $136 million and EPS of $.51 – $.61.


While consumers are looking to reduce their spending wherever possible, we continue to believe that consumers regard insurance as a must-have item. In fact, we believe that the vast amounts of layoffs (3.7M in the last six months), is actually helping eHealth’s business. Our checks show strong traffic growth accelerated in the first quarter as more consumers were shopping for insurance alternatives.


Going forward we remain very optimistic about eHealth’s business model. The company continues to post impressive sequential and year over year growth rates. In addition, the company is debt free, is accumulating a sizable war chest ($150M in cash) and has an attractive recurring-revenue business model.


Share Performance

Since the beginning of the year, eHealth’s shares are up over 21%. However, in 2008 EHTH’s shares plummeted over 58% as they badly underperformed the 34% decline in the Dow Jones index.



Shares are now trading at 24x consensus 2010 EPS estimates. This is inline with the relative valuations of their peer group. We believe that investors will be attracted to eHealth’s growth story and would expect to see the stock price appreciate further in 2009.


Recommendation: Buy with a $20 price target.


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