Bright Health Dips 19.6% on Wider-Than-Expected Q4 Loss

Shares of Bright Health Group, Inc. (BHG) sank 19.6% on Wednesday after the health insurance company posted a wider-than-expected loss for the fourth quarter of 2021. The company reported a loss of $1.29 per share, above the Street’s loss estimate of $0.45 per share. It had registered a loss of $1.20 per share in the same quarter last year.

Quarterly revenues grew 167.5% year-over-year to $962.3 million but failed to meet the consensus estimate of $1.08 billion. The upside can be attributed to significant growth in premium revenues.

The company reported a medical cost ratio (MCR) of 134.1%, which includes 860 basis points (bps) unfavorable impact from COVID-19 related costs and 2,640 bps unfavorable impact from lower premium revenue. The ratio stood at 105.4% in the same quarter last year.

Adjusted EBITDA was a loss of $790.1 million during the quarter, compared to the loss of $157.7 million in the prior-year period.

While Bright HealthCare commercial consumers came in at 611,078, NeueHealth value-based patients stood at 175,587.

Official Comments

The President and CEO of Bright Health, said, “Despite a challenging 2021, we have conviction in our strategy to continue driving alignment and integration of care delivery and financing at the local level. None of this is possible without an incredible team who deeply care about making healthcare right for consumers and we are focused on driving results off our scaled platform in 2022 and beyond.”

Guidance

For 2022, the company projects revenue to be in the range of $6.8 billion to $7.1 billion. Adjusted EBITDA is likely to land between $500 million and $800 million.

Bright HealthCare end-of-year membership is expected to be about 1,000,000, while NeueHealth’s Revenue is expected to be nearly $2.3 billion.

Wall Street’s Take 

Following the results, Bank of America Securities analyst Kevin Fischbeck downgraded the rating on Bright Health to Sell from Hold but decreased the price target to $2.50 (0.40% downside potential) from $6.

Fischbeck is of the opinion that the 2022 outlook provided by the company is disappointing as costs came in much higher than anticipated. Also, he mulls that the higher costs raise the likelihood of another dilutive capital raise.

Based on 3 Buys, 2 Holds and 2 Sells, the stock has a Hold consensus rating. The average Bright Health price target of $4.42 implies 76.1% upside potential from current levels. Shares have declined 84.9% over the past year.

Hedge Fund Trading Activity

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Bright Health is currently Very Negative, as the cumulative change in holdings across the three hedge funds that were active in the last quarter was a decrease of 9.6 million shares.

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