After a strategic restructuring in 2023, online insurance company EverQuote (NASDAQ: EVER) has produced several quarters of strong financial results. Recently, it reported top- and bottom-line beats for Q1, along with considerable earnings growth. This has helped propel the stock up by over 89% year-to-date. The shares now trade at a premium, likely reflecting the company’s growth potential and increasing profit margins.
A rebound in the lagging auto insurance industry would likely catalyze shares higher. The stock is an attractive option for long-term investors who embrace the old Warren Buffett adage, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
EverQuote’s Insurance Marketplace
EverQuote is an insurtech company that provides an online insurance marketplace that eases consumers’ purchasing process. It offers a variety of quotes for insurance services, including auto, home, renters, and life insurance, then connects buyers with local insurance agents. Not only does EverQuote cater to carriers and agents but also indirect distributors, further extending its reach in the market.
Recently, Betaville reported that EverQuote may have piqued the interest of a private equity firm looking for takeover opportunities, potentially presenting a new development in the company’s trajectory.
EverQuote’s Recent Financial Results & Outlook
The company recently reported a solid start to 2024, with first-quarter results surpassing analyst expectations. Revenue of $91.06 million exceeded the expected $80.31 million, though it marked a decline of 17% compared to the same period in 2023. This was primarily due to the 14% decrease in automotive insurance, which makes up roughly 85% of overall revenues. However, other key verticals, such as home and renters’ insurance, demonstrated a promising growth rate of 34%.
The company reported its GAAP net income improved to $1.9 million, compared to a GAAP net loss of $2.5 million year-over-year. Earnings per share were $0.05, a substantial improvement over the predicted -$0.07.
EverQuote ended the quarter with an increased cash and cash equivalent position of $48.6 million, up 28% from the end of Q4 2023.
Management has given guidance for Q2 revenue of $100-$105 million, significantly above consensus expectations for $77.29 million. This uptick is driven by the company’s increasing confidence in the auto insurance industry’s recovery.
What Is the Price Target for EVER Stock?
Analysts following the company have been constructive on the stock. For example, Needham analyst Mayank Tandon recently raised the price target from $25 to $30 while keeping a Buy rating on the shares. He noted that Q1 results were above expectations on all fronts and that Q2 guidance was well above consensus across the board.
Overall, EverQuote is rated a Strong Buy based on the aggregate ratings and price targets assigned by the six analysts issuing recommendations in the past three months. The average price target for EVER stock is $29.70, representing an upside of 28.02% from current levels.
The stock has been upward trending, climbing over 56% in the past 90 days. The shares are trading at the upper end of the 52-week price range of $5.36-$25.69. The P/S ratio of 2.9x exceeds the Communication Services sector average of 2.6x, suggesting the stock is relatively richly valued at this point. However, the strength of the company’s performance has attracted institutional buyers, who have now acquired over 57% of the stock.
Bottom Line on EVER
EverQuote has emerged as a solid investment prospect following a strategic restructuring and several quarters of impressive financial performance. The prospect of a recovery in the auto insurance industry, to which EverQuote is substantially exposed, suggests further potential upside. Even as the stock trades at a relatively rich valuation, its strong performance and growth prospects make it an attractive proposition for long-term investors.
