Welcome to Real Vision's Trade Ideas.
Today I'm sitting down with Michele Schneider of MarketGauge.
Thanks so much for joining us.
Thank you, Justine.
It's great to be back.
All right, so what's your trade idea today?
eHealth.
The symbol is EHTH.
And why are you looking at eHealth now?
Well, if we give a little background here on the company, it's had an interesting history
so far.
It started with a kid named Vib Patel.
Actually, Vip.
And he wound up getting food poisoning and didn't have health insurance.
And so he realized that there was no place for him to go online to shop for competitive
prices.
So he founded the company in 1997.
It eventually went public in 2006 as ehealth.com.
And when it got started, it really got it's first big boon when Obama passed the American
Care Act-- American Health Care Act in 2012.
So that's when it became on my radar.
So I've actually been aware of this stock for a long time.
As a company, it's actually a really fantastic company.
There are competitors, but it is the largest of all the places where you can shop online
for health products.
And so right now, it has serviced probably about five million people.
It has licensing agreements with 180 different health insurance companies.
And it offers about 10,000 products.
And so essentially, you go online, it's mainly for people who aren't either poor, being subsidized
by the government, or people who are working in jobs that have health care provided for
them.
So it's the private companies, private insured.
And you go on, and you put in your information, and it's amazing, because they will pop up
immediately not only the different companies and competitive prices, but you could actually
even input your doctors to see if your doctors would be covered under the plan.
The reason why it's growing currently is because a couple of reasons.
Number one is they started a Medicare division.
And their Medicare has grown tremendously over the last year.
And again, with supplemental insurance that you need with Medicare, it does all of that
for you.
It also gives you prescription plans, et cetera.
And then how have their earnings reports looked so far this year?
Well, the last earnings report was in July.
And it had a huge run up afterwards, even though overall revenues were down by 5%, the
Medicare portion was up by 6%.
But they have a very good look out for the next quarter or so because of a couple of
things that are happening with health care in the United States.
And one of those would be the new regulations that are coming on board with the Trump changes.
Yes.
So basically, a couple of things.
Number one is the penalties that people were getting for not having long-term health care
plans have been repealed.
So that opens up an audience of people who can shop now for short-term health insurance.
But what Trump is employing as of October is that those three months stopgap insurance
plans can be extended to 364 days, and possibly renewed up to five years.
However, there's a catch.
And that is that with these private insurance companies, they A, do not have to cover preexisting
conditions, maternity care, drug plans, or mental health.
Which means basically, you have to be a healthy person in order to qualify for these plans.
And you have to hope that you don't get sick, because you can be dropped.
However, the premiums have gone up since the Obamacare plan 62%.
So what it does is even though there are all these caveats, it does give you an option
to get some cheaper insurance if you're healthy.
Now what that will do for eHealth-- bringing it back to eHealth-- is that it will bring
on probably another few million people into the space of shopping for insurance.
OK, so why don't we go through some of the technicals.
Where do you see eHealth right now?
Well, at last look today, it was trading around 28.80 to 29.40 I think was the high.
And the 52 week high happened after the last earnings report.
So essentially, what it did after that big run is it came down and it consolidated.
And it went down to about 26.
If you really want to look at it from a near-term stop, you probably don't need to risk more
than under 25.50.
Our current stop though is a little cheaper, because we actually bought it cheaper.
But even 24.50 would be OK if you wanted to give it some room.
I think the buy zone is actually kind of where it's at right now, between 28 and 29.
If you get a good close over 29, I think that would be a fairly good indication to go in.
And since it has a 52 week high of 32.97, clearly, if it takes that out, that's two
things.
Number one is it takes out the 52 week high.
But also this month's price action has been inside the price action of August.
So it's an inside month, which means it will take that out.
So you could get a good burst to about maybe around 37 where you start to see first level
of resistance.
What's your time horizon here?
Is this a shorter term trade?
Well, the other thing that I wanted to mention about the company, besides the fact that the
new health policy could bring in a bunch of new shoppers, and of course, the Medicare,
is that on October 3, Scott Flanders-- who's the CEO of eHealth-- is going to the Cantor
2018 Global Health Conference.
So the key word in that sentence to me is global.
Because right now, the company really is just represented in all 50 states, but just throughout
the United States.
So if it winds up getting any kind of global presence, I think that can be a tremendous
shot in the arm to that stock price.
So when you ask how soon, I think, again, if we can get through this recent 52 week
high, we may see it pretty quickly.
So I'm looking at this as more of a ride the wave as opposed to buy and hold forever.
Because who knows what could happen politically going forward in terms of the health care
plan since it's been such a football and has been for years.
I would say if the market holds up, we could probably see that level maybe within two,
three months, possibly as far out as six.
And you mentioned that you had a stop.
So this is something that you're trading on behalf of yourself or your clients?
Yes, my subscribers to our service are in it, and our RIA is in it as well in the discretionary
model.
What do you see as the biggest risk to this right now?
Is it potentially the political climate, and maybe the elections coming up?
Well, I would say that the elections coming up probably won't impact too much.
Because even if there is a big democratic windfall in November, there's not going to
be a lot of action on the health care right away for a few reasons, which we don't have
to get into.
But let's just say that it would be relatively left alone at this point.
However, if in 2020 Trump is not reelected, then that would shake things up.
How that would affect the stock, I would have to re-evaluate at that time.
It could be more positive, it could be negative.
Yeah.
Too many variables there.
Exactly.
All right, can you break down this trade in 30 seconds?
Yes, buy it between 28 and 29.
And if you really want to look for a conservative entry way for a close over 29, risk down to
about 25 and a 1/2.
If you want to, 24 and 1/2.
It's very low volume stock, by the way, so you have to give it some wiggle room.
And look for a move especially if it clears the 52 week high up to about 37.
Mich, thank you so much.
Thank you.
So Mich likes buying shares of eHealth-- ticker symbol EHTH-- at current levels.
She has a stop loss of 25.50, and a target price of $37 over the next three months.
Just remember that this is a trade idea and not investment advice.
You should do your own research, consider your risk tolerance, and invest accordingly.
For Real Vision, I'm Justine Underhill.