Meme stock Clover Health Investment Corp (NASDAQ:CLOV) on Wednesday extended this week’s losses to 16% following the expiry of the 180-day share lock-up period.
Clover Health went public on 8th January via the SPAC Social Capital Hedosophia Holdings Corp. III. The stock traded in choppy pattern formation before spiking last month when it became the latest target of meme stock traders.
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CLOV has since eroded all the social hype-driven gains as meme stock traders continued to lose ground against Street investors.
Is Clover Health stock a buy in July 2021?
From a valuation perspective, Clover Health shares look significantly overvalued at the current P/S ratio of 21.45. The company is yet to break even, but things could change in the next few years.
Analysts expect Clover health earnings per share to grow 38% next year and at an average of 32% over the next five years. So if the company lives up to expectations, it will begin to net profits soon, boosting the stock price.
But for now, Clover Health seems headed for more declines before fundamentally turning a corner.
Technical overview: my CLOV price prediction for Q3 2021
Technically, CLOV share price appears to have pulled back to move closer to the 100-day moving average. However, it still has a lot of room to run before crossing to oversold conditions in the 14-day RSI.
The stock seems to have a strong bearish momentum that could take it closer to its all-time lows reached at the start of May.
Therefore, investors can target extended declines at approximately $6.63. However, Clover Health shares could still bounce back in the future when it begins to net profits. As such, bullish investors can target long-term profits at $14.18 and $17.46.
Bottom line: Clover health short-term declines to continue before a significant rebound
In summary, CLOV stock seems poised for continued downward movement in the short term. However, the current earnings growth expectations could subsequently trigger a rebound creating a bullish opportunity.
Therefore, investors can short the stock now or wait for the share price to fall further before buying long-term.
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