Bank Of America Downgrades EverQuote On Valuation Concerns

Although the fundamentals of EverQuote Inc’s EVER underlying business and long-term growth potential remain positive, the strong rally in the stock calls for a downgrade, according to Bank of America.

The Analyst

BofA’s Nat Schindler downgraded EverQuote from Buy to Underperform while keeping the price target at $16.50.

The Thesis

EverQuote’s shares have appreciated almost 8% since the time the company reported a revenue and earnings beat for the second quarter, Schindler said in the downgrade note.

He added that shares of EverQuote’s closest peer, LendingTree Inc TREE, had gained only 6% during the same period.

Expressing optimism regarding the company’s growth potential, the analyst mentioned several drivers of this view, including Home & Life, contribution from new verticals and improving profitability on better variable marketing margins (VMM).

Schindler emphasized, however, that the rapid acceleration in growth could reverse, as EverQuote had seen concerning revenue trends following its initial public offer. He further wrote that the company’s financial performance “could be relatively more volatile than other companies in our coverage universe.”

With EverQuote’s stock having appreciated 500% year-to-date, “any reversal in growth trends could significantly impact the stock price in the near term,” the analyst cautioned.