Last Update 21 Feb 26

Fair value Decreased 32%

SLQT: Rebased Expectations And New Pharmacy Agreement Will Support Future Upside

Analysts have trimmed their price targets on SelectQuote, with recent cuts of $1 and $2 contributing to a reduction in our fair value estimate from $4.50 to about $3.06 as they factor in adjusted growth, profitability, and risk assumptions.

Analyst Commentary

Bullish Takeaways

Bullish analysts see the revised price targets as reflecting updated expectations on growth and profitability rather than a fundamental change in the long term opportunity, which they still factor into their models.
The trimmed targets to around $3.06 are viewed as aligning valuation more closely with current execution assumptions, which some bullish analysts think reduces the risk of overpaying.
Supportive analysts consider the recalibrated fair value as giving the stock more room for upside if management delivers on efficiency and cost control goals already embedded in forecasts.
Some bullish analysts frame the new targets as a reset that could make future positive surprises on margins or revenue mix more impactful for valuation.

Bearish Takeaways

Bearish analysts interpret the $1 and $2 target cuts as a sign that prior expectations for growth and profitability were too optimistic given current risk assumptions.
The move from $4.50 to about $3.06 in fair value is seen by cautious analysts as pointing to a tighter margin for error on execution, with less room for operational missteps.
More cautious views highlight that higher perceived risk is now embedded in models, which can cap how far valuation stretches until there is clearer evidence on consistent performance.
Bearish analysts also flag that repeated target reductions, even if modest, can make it harder for the shares to re rate quickly without a clear shift in fundamentals or risk profile.

What's in the News

SelectQuote issued earnings guidance for fiscal 2026, with revenue expected in a range of US$1.61b to US$1.71b (Key Developments).
SelectRx pharmacy reached a new, multiyear agreement with a long time pharmacy benefit manager partner, aimed at providing more predictable economics for both sides (Key Developments).
The new PBM agreement took effect on January 1, 2026, and is described as aligning with expectations shared on SelectQuote's first quarter fiscal 2026 earnings call (Key Developments).
SelectRx continues to serve Medicare beneficiaries across all 50 states from three pharmacy facilities in Pennsylvania, Indiana, and Kansas (Key Developments).

Valuation Changes

Fair Value: revised from $4.50 to about $3.06, a sizable reduction in the modeled upside per share.
Discount Rate: moved from 8.80% to about 10.19%, indicating a higher required return being used in the valuation work.
Revenue Growth: adjusted from 9.32% to about 5.76%, reflecting more conservative assumptions for future $ revenue expansion.
Net Profit Margin: updated from roughly 0.03% to about 2.01%, implying higher expected profitability on future $ sales in the model.
Future P/E: brought down from a very large 168,964.62x to about 1,986.20x, which still represents an extremely high multiple in the updated framework.

Expansion in healthcare services and technology investments boost revenue growth, margin expansion, and operational efficiency, driving higher profitability and improved cash flow.
Growing Medicare market and diversified revenue streams enhance long-term stability, reducing earnings volatility and strengthening the company's financial position.
Slowing growth, reliance on cost cuts, market volatility, and persistent balance sheet risks challenge SelectQuote's ability to sustain margins and long-term earnings expansion.

Catalysts

About SelectQuote

Operates a technology-enabled, direct-to-consumer distribution and engagement platform that sells insurance policies and healthcare services in the United States.What are the underlying business or industry changes driving this perspective?

Rapid growth of the Healthcare Services business, especially SelectRx, demonstrates strong product-market fit with recurring, high-margin revenue and significant runway for further margin expansion as scale efficiencies kick in; this positions the company for sustained revenue and EBITDA growth.
Increasing adoption of digital platforms for insurance and healthcare services, combined with SelectQuote's advanced technology and AI investments, continues to reduce customer acquisition costs and drive agent productivity, supporting higher operating margins and improved EBITDA.
The aging U.S. population and rising Medicare enrollment ensure a steadily expanding addressable market, enabling long-term top line growth opportunities across both the Medicare insurance and pharmacy segments.
Enhancement of operational efficiency through automation and process optimization, evidenced by rising agent productivity and improved revenue-to-CAC ratios, sets the stage for higher profitability and stronger operating cash flows in future years.
The company's transition toward a diversified platform with a balanced mix of immediate cash-generating healthcare revenues and more stable, recurring senior insurance cash flows reduces earnings volatility and supports improved free cash flow and balance sheet strength over time.

SelectQuote Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming SelectQuote's revenue will grow by 9.8% annually over the next 3 years.
Analysts assume that profit margins will shrink from 1.6% today to 1.3% in 3 years time.
Analysts expect earnings to reach $25.7 million (and earnings per share of $0.02) by about September 2028, up from $25.0 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 45.2x on those 2028 earnings, up from 14.6x today. This future PE is greater than the current PE for the US Insurance industry at 14.6x.
Analysts expect the number of shares outstanding to grow by 0.77% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.0%, as per the Simply Wall St company report.

SelectQuote Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

SelectQuote's Healthcare Services (SelectRx) is experiencing slowing membership and revenue growth rates as the business matures, suggesting diminishing expansion opportunities which could limit long-term revenue growth and EBITDA margin improvement.
The company anticipates relatively flat Senior policy volumes and expects agent productivity to revert to historical norms, which may constrain future revenue growth and compress margins due to a less favorable business mix.
Margin expansion is heavily dependent on further cost optimization and automation; if technology investments or efficiencies do not adequately offset rising costs or competitive pressures, net margins and profitability targets may not be realized.
Persistent volatility and disruption in the Medicare Advantage market, including plan terminations and carrier profitability actions, expose SelectQuote to policy volume declines and lower Lifetime Value (LTV) per policy, risking the stability of earnings and cash flow.
Despite recent improvements, the company's focus on improving its balance sheet and cost of capital indicates ongoing leverage and capitalization risks; a failure to further optimize the capital structure could elevate financing costs and impede reinvestment in technology or new business lines, hindering long-term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $5.25 for SelectQuote based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $3.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.0 billion, earnings will come to $25.7 million, and it would be trading on a PE ratio of 45.2x, assuming you use a discount rate of 8.0%.
Given the current share price of $2.12, the analyst price target of $5.25 is 59.6% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Healthcare Services And Medicare Will Boost Future Momentum Amid Risks