Health Insurance Innovations (HIIQ) — Sell-off Overdone

Shares fell sharply (18%) on Q3 2014 results during yesterday’s trading session.The reason for the drop in price was probably because the company missed EPS estimates which resulted in the company showing no growth for the quarter.  Non-GAAP EPS for Q3 2014 was $0.08 vs $0.09 in the prior year and below analyst EPS estimates of $0.11. However we think the sell off was overdone given the following facts:

• HIIQ beat analyst revenue estimates, reporting revenues of $23.4 million vs $14.8 and ahead of analyst estimates of $21.8 million.
• Full year 2014 revenue guidance (atleast 50% or more growth vs 2013) right in line with analyst estimates of $85 million and possibly conservative.
• Looks like miss in EPS estimate was due to extra expenses incurred to fuel future growth.
• Two analysts upgraded the stock with a “Buy” and “Strong Buy” rating with price targets of $13 and $15.
• Finally, the company claims to be the leader and should benefit from Obamacare or any variation of Obamacare.
• Here are some quotes from conference call describing some segments of their business:

“Similarly, HealthPocket’s doctor search technology allows consumers to enter their healthcare providers into HealthPocket.com. HealthPocket then finds every health plan that the consumers’ Doctor accepts across all major health plan categories. HealthPocket has the only comprehensive health plan doctor search tool in the market today.

Thirdly, HealthPocket’s proprietary health plan rankings help consumers select the specific health plan that best meets their unique needs. Our proprietary algorithms measure each health plans’ quality based on unbiased government and nonprofit data sources. And we wait this government quality data with our own analysis of each plan’s financial value.”