SLQT - Should you buy or sell SelectQuote shares after disappointing Q4 results?
On Thursday, SelectQuote Inc. ( NYSE:SLQT ) shares plunged more than 44% to trade at $7.95 per share following Wednesday’s disappointing Q4 results. The company reported its most recent quarterly results Wednesday after markets closed, missing analyst expectations on earnings.
More than 23 million shares of the life insurance company changed hands on Thursday, a significant spike from the daily average of about $1.3 million. The company is a direct-consumer insurance comparison business and saw significant growth in revenue in the quarterly report.
However, investors and analysts seem more interested in the management commentary, which sent weak signals about the future. SelectQuote issued a full-year 2022 EBITDA guidance of $255-$285 million against a consensus Street estimate of $316 million.
RBC Capital Markets analysts downgraded the stock to sector-perform (neutral) from outperform (buy), citing its soft FY2022 guidance. The analysts lowered their price target from $33.00 to $13.00 per share.
So should you buy or sell SLQT shares now?
From a valuation perspective, SelectQuote shares trade at an attractive P/E ratio of about 9.07 following Thursday’s plunge. Therefore, bargain hunters could find the current valuation multiple attractive for a long-term buy.
Moreover, although analysts expect SLQT earnings to fall by 126% this year, its EPS could grow at an average annual rate of 36.56% over the next five years, making it attractive to growth investors.
Therefore, the current SLQT plunge presents an exciting opportunity to buy the stock ahead of a potential rebound. Furthermore, Thursday’s decline significantly overstates the potential impact of the company’s weak 2022 EBITDA guidance.
Technical overview: SelectQuote stock price forecast for Q3 2021
Technically, the SLQT stock seems to be trading within a descending channel formation in the intraday chart. Moreover, the stock plunged to oversold conditions of the 14-day RSI following Thursday’s decline.
As a result, SelectQuote shares seem poised for an immediate rebound, with investors potentially overreacting to the weak full-year 2022 EBITDA guidance. Therefore, investors can target potential rebounds at approximately $12.85 or higher at $18.36.
On the other hand, if the decline continues, the stock could find support at around $4.11.
Bottom line: the case for buying the SLQT stock price rebound
In summary, although SelectQuote shares seem to be trading under intense bearish pressure, the stock has plunged to oversold conditions, creating the perfect opportunity for a rebound.
Moreover, SLQT offers exciting growth potential over the next five years, adding to its attractive P/E ratio. Therefore, with investors potentially overreacting to the company’s weak 2022 EBITDA guidance, a rebound seems inevitable.
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