EverQuote, Inc.

EVER Details

EverQuote, Inc. (NASDAQ: EVER) provides online insurance shopping platforms in the United States. Customers can use its digital platform to get relevant insurance quotations for auto, home, and life insurance products. In addition, it also sells consumer referrals to insurance providers, such as carriers, agents, and indirect distributors, for a profit. Increased consumer traffic, which can be delivered by extending existing advertising channels and introducing new channels, supports EVER's revenue growth. As of July 26, 2021, the company’s market capitalization stood at USD 858.91 million.

Acquisition of PolicyFuel, LLC: On July 20, 2021, EVER announced that it has agreed to buy PolicyFuel and its subsidiaries for a cash consideration of ~USD 16 million. PolicyFuel provides policy-sales-as-a-service (PSaaS) services to its carrier clients in the property and casualty (P&C) insurance space. The acquisition allows EVER to widen its product offerings to support its P&C carrier partners' development and enhance its capacity to reach the USD 135 billion commission TAM component of the insurance distribution spends moving online.

Q1FY21 Results: The company reported a sharp uptick of 27.60% in total revenue to USD 103.82 million in Q1FY21 (ended March 31, 2021) compared to USD 81.36 million in Q1FY20, primarily due to an increase in automotive segment revenues and volume of quote requests. However, the company reported an increase in net losses to USD 3.80 million in Q1FY21 vs. USD 1.44 million in Q1FY20 due to a significant sales and marketing expenses increase. As of March 31, 2021, the company had cash and cash equivalents of USD 46.89 million with no outstanding debt.

Strong Track Record (Source: Investor Presentation, May 2021)

Key Risks: The company's top customer, i.e., Progressive Casualty Insurance Company (PCIC), represented 20% and 22% of the total revenues during Q1FY21 and FY20, respectively. In addition, one customer accounted for 17% and 12% of the total accounts receivable during these periods. As a result, excessive dependence on a few customers for business could hurt the company’s financial health in the future.

Outlook: For Q2FY21, EVER expects its revenues to be in the range of USD 101 to USD 103 million, representing a 30% YoY increase, with adjusted EBITDA expected to range between USD 5 to USD 6 million, which represents a 38% YoY increase.

For FY21, EVER anticipates its revenues to be in the range of USD 434 to USD 442 million, representing a 26% YoY increase, with adjusted EBITDA estimated to be around USD 26 to USD 30 million, which represents a 52% YoY increase.

Valuation Methodology: Price/Cash Flow Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

EVER Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: EVER stock fell by 36.80% in the past 12 months and is currently leaning towards the lower-band of the 52-week range of USD 27.94 to USD 56.18. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 45.94. We have valued the stock using the Price/Cash Flow-based relative valuation methodology and arrived at a target price of USD 36.43. Considering the company’s growth prospects, strong track record, robust balance sheet, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 30.31, up 1.54% as of July 26, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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