SelectQuote Tanks 50% on Unexpected Q2 Loss & Muted Outlook

SelectQuote, Inc. (NYSE: SLQT) reported worse-than-expected fiscal Q2 results, significantly lagging both earnings and revenue estimates due to various unforeseen challenges including issues in its core Senior segment, hiring and onboarding delays related to the labor market constraints, among others.

Further, the company also reduced its fiscal 2022 guidance significantly lower than analysts’ expectations.

Following the weak results and dimmed outlook, half of the company’s market capitalization got wiped out during the extended trading session on February 7.

SelectQuote Inc is a direct-to-consumer (DTC) distribution platform that helps consumers shop online for health, life, and auto & home insurance policies. 

Q2 Numbers

Disappointingly, the company reported an adjusted loss of $0.84 per share, which was much worse than the street’s estimated earnings of $0.59 per share. Comparatively, the company reported adjusted earnings of $0.54 per share for the prior-year period.

Further, revenues declined 45.5% year-over-year to $195 million and fell massively short of consensus estimates of $457 million.

The decrease in revenues reflected a 50% dip in core Senior segment revenues to $157.96 million.

Muted FY2022 Outlook

Based on the weak fiscal Q2 results, the company updated its outlook for the full-year fiscal 2022 well below streets estimates.

The company anticipates reporting a net loss for full-year fiscal 2022 in the range of $255 million to $236 million.

Further, revenues are projected to range between $810 million to $850 million, much lower than the consensus estimates of $1.3 billion.

CEO Comments

SelectQuote CEO, Tim Danker, stated, “SelectQuote is committed to our Senior distribution business and the large value opportunity it presents in tandem with our growing Population Health initiative. That said, the disappointing performance year-to-date will result in changes to our strategy, with a focus on driving efficiencies.”

He further added, “We aim to reduce earnings volatility and downside risk through a reset of our growth and operating leverage philosophy. Moving forward, growth will be more focused on cash flow and predictability. We are confident in our ability to deliver value to shareholders despite a challenging year and look forward to proving our potential beyond fiscal 2022.”

Wall Street’s Take

Following the muted Q2 results and guidance, Credit Suisse analyst Jailendra Singh downgraded SelectQuote from Buy to Hold and also decreased the price target to $4 (38.7% downside potential) from $14.

Singh stated, “We were Neutral on the group but had maintained our Outperform rating on SLQT shares on our belief that, relative to its peers, SLQT was better positioned to manage through these challenges.”

He added, “However, FY2Q22 results prove that the macro environment for the group remains extremely tough and SLQT is not immune to those challenges.”

Consensus among analysts is a Hold based on 1 Buy and 4 Holds. At the time of writing, the average SelectQuote stock forecast was $11.40, which implies 74.6% upside potential to current levels.

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