eHealth's (NASDAQ:EHTH) Q1 Sales Beat Estimates, Stock Soars

Max Juang /
2024/05/07 8:35 am EDT

Online health insurance comparison site eHealth (NASDAQ:EHTH) reported Q1 CY2024 results topping analysts' expectations, with revenue up 26.1% year on year to $92.96 million. The company expects the full year's revenue to be around $462.5 million, in line with analysts' estimates. It made a GAAP loss of $0.96 per share, down from its loss of $0.72 per share in the same quarter last year.

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eHealth (EHTH) Q1 CY2024 Highlights:

  • Revenue: $92.96 million vs analyst estimates of $80.61 million (15.3% beat)
  • EPS: -$0.96 vs analyst expectations of -$0.81 (19% miss)
  • Free Cash Flow of $68.27 million is up from -$35.38 million in the previous quarter
  • Estimated Membership: 1.18 billion, down 57.59 million year on year
  • Market Capitalization: $138.9 million

Aiming to address a high-stakes and often confusing decision, eHealth (NASDAQ:EHTH) guides consumers through health insurance enrollment and related topics.

Online Marketplace

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.

Sales Growth

eHealth's revenue has been declining over the last three years, dropping on average by 5.8% annually. This quarter, eHealth beat analysts' estimates and reported decent 26.1% year-on-year revenue growth.

eHealth Total Revenue

Before the earnings results were announced, analysts were projecting revenue to decline 8.8% over the next 12 months.

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Usage Growth

As an online marketplace, eHealth generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.

eHealth has been struggling to grow its users, a key performance metric for the company. Over the last two years, its users have declined 3.3% annually to 1.18 billion. This is one of the lowest rates of growth in the consumer internet sector.

eHealth Estimated Membership

In Q1, eHealth's users decreased by 57.59 million, a 4.7% drop since last year.

Revenue Per User

Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like eHealth because it measures how much the company earns in transaction fees from each user. Furthermore, ARPU gives us unique insights as it's a function of a user's average order size and eHealth's take rate, or "cut", on each order.

eHealth ARPU

eHealth's ARPU growth has been mediocre over the last two years, averaging 3.3%. Although its users have shrunk during this time, the company's ability to increase prices shows that existing users still value its platform. This quarter, ARPU grew 32.3% year on year to $0.08 per user.

Key Takeaways from eHealth's Q1 Results

We were impressed by how significantly eHealth blew past analysts' revenue expectations this quarter. It came at a cost, however, as its EPS missed estimates by a wide margin. Looking ahead, eHealth's full-year revenue guidance aligned with Wall Street's projections while its EPS was much higher. We think this was a decent quarter, showing that the company is staying on track. The market is rewarding eHealth for its revenue beat and strong earnings guidance, and the stock is up 8.6% after reporting. It currently trades at $5.2 per share.

So should you invest in eHealth right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.