Bright Health Tanks 32% on Wider-Than-Feared Quarterly Loss

Shares of Bright Health Group, Inc. (BHG) sank 32.3% to close at $4.94 on Thursday after the health insurance company posted a larger-than-expected loss for the third quarter of 2021.

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Results in Detail

Bright Health incurred a third-quarter loss of $0.48 per share, compared to the Street’s loss estimate of $0.14 loss per share. The company had reported a loss of $0.43 per share in the prior-year quarter.

Meanwhile, quarterly revenues stood at $1.08 billion, lower than the consensus estimate of $1.09 billion. However, revenues grew 206.3% year-over-year on the back of growth in organic membership in Bright HealthCare during the 2020 open enrollment period and the 2021 special enrollment period for commercial business.

The company reported a medical cost ratio (MCR) of 103%, which includes 540 basis points (bps) unfavorable impact from COVID-19 related costs and 900 bps unfavorable impact from lower premium revenue. The ratio stood at 90.1% in the same quarter last year.

Adjusted EBITDA was a loss of $245.9 million in the quarter, compared to the loss of $54.1 million in the prior-year period. (See Bright Health stock charts on TipRanks)

While Bright HealthCare commercial consumers came in at 606,594, NeueHealth value-based patients stood at 170,211.

Official Comments

The Chief Financial and Administrative Officer of Bright Health, Cathy Smith, said, “Overall, we believe matching payment to population health status is needed to align incentives and drive performance in the direct-to-consumer market. However, with a predominately new and rapidly growing business, population health risk is difficult to estimate in the near-term but is expected to improve as our markets and populations mature, setting us up well for 2022.”

Guidance

For 2021, the company projects revenue to be in the range of $4.1 billion to $4.2 billion versus analysts’ expectations of $4.13 billion. Adjusted EBITDA is likely to land between negative $550 million and negative $600 million.

Bright HealthCare has raised end-of-year membership guidance by 8%, which is expected to be about 700,000.

Wall Street’s Take

Following the third-quarter results, Piper Sandler analyst Jeffrey Garro maintained a Buy rating on the stock but decreased the price target to $10 (102.43% upside potential) from $24.

Garro foresees growth and improvement in the profitability of the company but has “cut his FY21 EPS view on Bright Health to a loss of $1.37 from a loss of $0.68.” He expects the company to report a loss per share of $1.03 in FY22.

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 4 Buys and 2 Holds. The average Bright Health price target of $12.67 implies 156.5% upside potential. Shares have lost 70.3% over the past year.

Smart Score

According to TipRanks’ Smart Score system, Bright Health gets a 7 out of 10, which indicates that the stock is likely to perform in line with market averages.