TipRanks Smart Growth Newsletter #12: Premium Potential
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Dear Investors,
Welcome to the 12th edition of our TipRanks Smart Growth Newsletter.
Through the Smart Growth Newsletter, we aim to provide you with high-potential investment insights to support your growth strategy. Each week, our analysts will identify cutting-edge companies positioned to capture market share and deliver exceptional growth, giving you unique insights for a dynamic investing landscape.
Stocks we recommend have been carefully analyzed and vetted using TipRanks data, ensuring you receive well-researched, high-potential opportunities aimed at delivering substantial, long-term growth. We will present you with a comprehensive analysis that outlines our selection process, giving you clear insights into why each stock stands out as a top growth opportunity.
With that in mind, let’s dive into this week’s top pick and explore why it could be a valuable addition to your Growth portfolio.
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This Week’s Top Growth Pick: EverQuote (EVER)
EverQuote, Inc. is an online insurance marketplace that connects consumers with insurance providers through data-driven matching technology. Its platform leverages AI and proprietary algorithms to streamline insurance shopping, delivering personalized quotes across auto, home, life, and health insurance categories. EverQuote helps insurers and agents optimize customer acquisition, improving efficiency and conversion rates. Operating on a performance-based revenue model, the company continues to expand its network of insurance partners. As digital adoption in the insurance industry grows, EverQuote enables consumers to make informed coverage decisions while enhancing the distribution capabilities of insurance providers in an increasingly competitive and technology-driven marketplace.
Source: EverQuote Q3 2024 Investor Presentation
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Here’s Why EVER’s Stock Is Likely to Grow:
❖ Market Leadership: A dominant force in the digital insurance marketplace, leveraging AI to connect consumers with tailored policies in auto and home insurance verticals.
❖ Strategic Market Focus: Recent concentration on more scalable, high-margin auto and home insurance markets is already yielding outstanding results.
❖ Scalable Business Model: Performance-based revenue model, optimizing customer acquisition for insurers and driving efficiency through technology-driven matchmaking.
❖ Strong Financials: Debt-free with a solid liquidity position, generating robust revenue growth and a substantial increase in adjusted EBITDA.
❖ Growth Potential: Positioned to benefit from increased competition among insurers and growing digital adoption, especially as marketing budgets expand.
❖ Attractively Valued Stock: Moderately priced compared to Insurtech peers, with analysts forecasting significant upside potential driven by long-term growth and market share expansion.
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Insurtech Evolution
EverQuote, Inc. was launched in 2011 in Cambridge, Massachusetts, as an online insurance marketplace designed to connect consumers with insurance providers using data-driven technology. The company initially focused on auto insurance, leveraging proprietary algorithms to match users with personalized policy options.
The company has expanded its platform through investments in technology and strategic partnerships. In 2018, it completed its IPO on the Nasdaq under the ticker EVER, raising $84 million to support growth initiatives.
The company broadened its offerings beyond auto insurance, incorporating home, life, and health insurance into its marketplace. However, EVER exited the health insurance vertical in mid-2023 and has since streamlined its focus further, no longer offering life or health insurance, while maintaining a strong presence in auto and home insurance.
To strengthen its presence across insurance verticals, EVER pursued strategic acquisitions. In 2021, it acquired PolicyFuel, expanding its capabilities in the property and casualty insurance sector.
EverQuote has also built an extensive network of industry partnerships to enhance its platform. Key insurance carrier partners include Progressive, Liberty Mutual, Nationwide, MetLife, Prudential, and others, enabling the company to provide a broad range of policy options to consumers.
In addition to insurer partnerships, EVER collaborates with lead management software (LMS) providers such as Blitz, Agency MVP, and DYL. These integrations help insurance agents efficiently manage and convert high-quality leads generated through EverQuote’s marketplace.
The company has also partnered with Fintech firms to enhance its platform’s efficiency and compliance capabilities. Bold Penguin streamlines commercial insurance processes, Jornaya helps manage compliance risks, and Ricochet360 provides advanced CRM and marketing automation tools to improve agent workflows.
As digital insurance adoption grows, EverQuote continues to optimize the distribution of insurance products through technology-driven solutions, reinforcing its role in the evolving Insurtech landscape.
Source: EverQuote Q3 2024 Investor Presentation
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Algorithmic Edge
EverQuote differentiates itself in the competitive Insurtech landscape through its data-driven approach, leveraging artificial intelligence (AI), proprietary algorithms, and machine learning (ML) to streamline the insurance shopping experience. At its core, EVER’s platform is designed to efficiently match consumers with insurance providers, optimizing policy recommendations based on user behavior, risk assessment, and real-time market data.
When EverQuote launched in 2011, the insurance marketplace was largely fragmented, dominated by direct insurer websites and traditional lead-generation models. EverQuote introduced a scalable, technology-driven alternative, centralizing the insurance shopping process and enabling dynamic, personalized policy matching at a time when comparison tools were still evolving. The company’s approach was innovative, bringing together advanced data science, behavioral analytics, and automation to enhance efficiencies for both consumers and insurers.
A key innovation within EverQuote’s platform is its real-time bidding system, allowing insurance providers to compete for high-intent consumers. This performance-based model benefits insurers by optimizing ad spend and customer acquisition costs, while consumers receive tailored policy options that align with their specific needs. The company continuously refines its algorithmic models, incorporating feedback loops and AI-driven insights to improve conversion rates and engagement.
Beyond marketplace functionality, EverQuote has invested in solutions that enhance consumer engagement and insurance literacy. The EverDrive app, launched in 2016, was a notable step in this direction, using telematics to analyze driving behavior and incentivize safer driving habits. This positioned EverQuote not just as an insurance marketplace, but as an advocate for risk reduction—an approach that benefits both insurers and policyholders—enhancing the company’s brand presence through customer engagement.
The company’s ability to scale its platform across multiple insurance verticals further strengthens its competitive position. By continuously evolving its technology stack and expanding partnerships with insurers and financial technology firms, EverQuote remains a key player in the digital transformation of the insurance industry.
Source: EverQuote Q3 2024 Investor Presentation
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Pipeline of Premiums
The U.S. insurance distribution market, encompassing both traditional and digital channels, was valued at $210.4 billion in 2023 and is projected to grow at a CAGR of about 8% through 2029. Within this, the digital insurance distribution segment—EverQuote’s core market—is expanding at a faster pace, increasing from $20 billion in 2023 to an estimated $50 billion by 2029, implying a CAGR of 16.4%.
As the industry shifts online, EVER operates in the fastest-growing segment, with significant market share expansion potential driven by increasing consumer demand for digital insurance shopping, greater carrier adoption of performance-based marketing, and advancements in data-driven policy matching. This trend is particularly strong in the auto and home insurance sectors, where the company has established a competitive presence.
EVER utilizes a performance-based business model, generating revenue primarily from insurance carriers and agents who pay for qualified leads and policy sales. Unlike traditional ad-based models, EVER’s approach optimizes customer acquisition efficiency for insurers, ensuring they only pay for high-intent consumers. This alignment of incentives makes EVER an attractive partner for insurers looking to improve conversion rates while managing marketing spend.
A key advantage of EVER’s business model is its data-driven, AI-powered marketplace, which continuously refines matching algorithms to improve lead quality and policy conversion rates. The platform’s ability to adjust the price of insurance leads dynamically based on real-time demand and predictive analytics enhances revenue scalability.
EVER’s platform is free for consumers, with revenue generated primarily through referral fees paid by insurance providers when a policy is purchased through the marketplace. Insurance providers use EVER’s services to access high-intent consumer leads that match their target profiles. The platform also provides tools for insurers to manage marketing campaigns, refine audience targeting, and track performance metrics.
Beyond its core lead marketplace, EVER has expanded into agent enablement solutions, offering products like EverQuote Pro, which provides marketplace data, campaign management tools, and automation features to help independent agents manage and convert leads more effectively. These solutions deepen EVER’s role in the insurance ecosystem while diversifying revenue beyond lead generation.
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Margins, Metrics, and Momentum
In contrast to most growth companies that rely on leverage, EverQuote has strategically maintained a debt-free balance sheet, opting to finance its operations and growth through equity-based funding. Moreover, EVER displays strong liquidity, as evidenced by its cash and cash equivalents totaling $82.84 million at the end of Q3 2024. This robust cash position underscores the company’s financial flexibility, enabling it to effectively manage operational needs and invest in growth opportunities.
EverQuote’s top line took a hit in 2023, as the company exited its health insurance vertical, which accounted for about 10% of total annual revenue. This strategic decision was driven by the recognition that the health insurance business requires significant capital investment and scale to compete effectively amid an increasingly unpredictable regulatory environment. The exit was part of EVER’s broader plan to streamline operations and focus on its most capital-efficient segments, ultimately reducing non-marketing operating expenses by over 15%.
Source: EverQuote Q3 2024 Investor Presentation
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The strategy of focusing on core strengths, enhancing financial performance, and strengthening its competitive position appears to be successful, driving substantial improvements in profitability. EverQuote returned to growth at the end of 2023, registering triple-digit revenue expansion in the three reported quarters of 2024. Over that period, EVER’s top line expanded by almost 52% year-over-year, despite the continued phase-out of non-core businesses, while its adjusted EBITDA grew by nearly 30x, and net income and operating cash flows moved firmly into positive territory.
In Q3 2024, EverQuote achieved record-high revenue and net income. The company’s total revenues expanded by nearly 163% YoY, driven by a ~202% surge in its largest business line, Auto Insurance, and supported by a healthy 30% gain in the Home and Renters segment. Adjusted EBITDA and Variable Marketing Margin (VMM)—a key performance metric—also set new records, once again exceeding the high end of the company’s guidance range. Specifically, VMM grew 136% YoY to $43.9 million.
Looking ahead, EverQuote anticipates a seasonal revenue decline, with Q4 2024 revenue projected at $131-136 million (reflecting 140% YoY growth), VMM of $38-40 million, and adjusted EBITDA of $14-16 million. This cautious yet optimistic outlook reflects EverQuote’s consideration of upcoming regulatory changes.
The FCC planned to enforce new TCPA regulations in January 2025, requiring one-to-one consent for insurance telemarketing calls, which could have reduced EverQuote’s lead value. However, the rule was postponed until January 2026, giving EVER more time to adjust its lead generation process and minimize potential revenue impact. As a result, analysts expect the actual Q4 2024 results, scheduled to be reported on February 24th, to exceed guidance.
Looking beyond Q4, EverQuote has established a solid financial foundation for long-term revenue growth and margin expansion. As operating leverage improves and the company continues to optimize customer acquisition efficiency, profitability should strengthen further.
Source: EverQuote Q3 2024 Investor Presentation
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Navigating Market Shifts
EverQuote’s stock has risen by over 64% in the past 12 months, even accounting for a drop of over 30% from August through October. In this period, EVER’s stock was pressured by investor concerns about the sustainability of the auto insurance industry’s recovery and uncertainty around the pending FCC consent rule. In addition, the investors realized gains after the company’s Q2 results smashed expectations.
As the FCC rule change was postponed, insurance companies continued to increase their marketing budgets, EVER published another record-breaking quarterly report, and the stock strongly recovered. However, it still remains attractively priced relative to its Insurtech peers. Its P/S ratio positions it in the middle of its peer group, while its Forward P/E ratio also signals moderate valuation compared to peers that are not operating at a loss. Moreover, future cash flow analyses suggest the stock may be undervalued by over 70%, highlighting its potential appeal for long-term investors.
In the near term, the recently implemented tariffs on auto parts and other imports from Canada and Mexico could impact insurer profitability by increasing repair costs, which in turn might affect EverQuote’s business growth. However, analysts have been monitoring this development since late 2024 when the tariffs were first proposed, and the immediate impact may already be priced into some market valuations. Besides, the industry is expected to adjust over time, while EverQuote may even benefit from intensified competition among insurers for customer acquisition in a more challenging market environment.
Analysts at leading Wall Street firms rate EverQuote a “Strong Buy,” granting it an average price target implying an upside of over 55% in the next 12 months.
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To Sum It All Up
EverQuote is a leading digital insurance marketplace, leveraging AI and proprietary algorithms to connect consumers with tailored policy options across auto and home insurance. With a performance-based revenue model, the company is capitalizing on the rapid digital adoption in insurance. After exiting its health insurance vertical, EverQuote has strengthened its focus on more profitable, scalable segments, including auto and home. The company’s strong liquidity, growing partnerships, and technology-driven platform enable it to efficiently drive customer acquisition. Despite market volatility, EverQuote’s solid financial foundation and industry-leading innovation position it well for long-term growth. Analysts see strong upside potential, with EverQuote trading at a moderate valuation relative to its peers, making it a compelling growth investment.
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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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