SelectQuote's Growth and Challenges Amid Strong Insurance Market

A report highlights SelectQuote's impressive stock performance, driven by a significant increase in pharmacy revenue and a solid business model. Though challenges in revenue growth and adjusted EBITDA are noted, the company remains on a path toward profitability.

Date: 13-10-2024

AI Rating: 6

SelectQuote has demonstrated strong performance in the insurance sector in 2024, with a stock increase of 54%. This positive trend is indicative of the overall success within the large-cap insurance market, where every stock has reported gains. This momentum can potentially encourage investors and drive stock prices higher.

The company operates a unique direct-to-consumer insurance platform and has outlined competitive advantages such as technology and a non-affiliated sales team, allowing for unbiased pricing comparisons. This differentiating model helps in improving customer retention, which is crucial for long-term revenue generation.

Importantly, SelectQuote has successfully grown its pharmacy segment, reporting a remarkable 680% increase in pharmacy revenue over two years, compared to a 22% rise in insurance commissions. This aspect shows that the company's diversification efforts are paying off and indicates potential for future earnings growth. However, while these figures are promising, one must note that overall revenue growth is expected to slow down to around 10% next year, which might temper investor enthusiasm.

The report also reveals a reduction in loss per share. SelectQuote managed to bring down losses in fiscal 2024 to $0.20 from $1.81 in 2022. This improvement indicates that the company is moving closer to profitability, which is a positive sign for investors. However, the anticipated decline in adjusted EBITDA by 10% due to changes in the commission structures poses a risk. Such changes can affect margins and overall earnings potential, which may cause volatility in stock prices.

In summary, SelectQuote's performance showcases both strengths and weaknesses. The growth in its pharmacy segment and reduction in losses are favorable indicators, yet the forecasted slowdown in revenue growth and EBITDA could pose challenges. Investors will need to weigh these factors when considering the company’s valuation against market opportunities that may arise in the insurance sector.

Stocks: SLQT PGR