BHG - Bright Health soars ~30% on adj. EBITDA profitability update; JPMorgan downgrades stock

Shares of small-cap managed care services provider Bright Health ( NYSE: BHG ) have gained 30.2% to $1.19 in Tuesday afternoon trading, after the company announced a capital raise that it said would make it profitable on an adj. EBITDA basis a year earlier than previously anticipated.

BHG now expects to be adj. EBITDA profitable in 2023, a goal which would also be achieved due to a change in its business strategy under which the health insurer said it would no longer offer Medicare Advantage plans outside of California and Florida.

"Focusing on Bright Health’s largest healthcare markets where it operates its differentiated Fully Aligned Care Model in partnership with aligned external payors and care providers is a faster path to profitability, has greater predictability, and is more capital efficient," BHG said in its statement earlier on Tuesday.

JPMorgan analyst Lisa Gill in a research note called the updated adj. EBITDA profitability guidance a positive, but expressed concerns about the shift in business direction.

"A complete reversal of BHG's initial strategy since going public ~15 months ago doesn't alleviate our concerns about execution and consistency," Gill said.

The analyst downgraded the rating on BHG stock to underweight, as she believes "other companies within our coverage offer a more balanced risk/reward profile to investors seeking exposure to Medicare Advantage and/or primary care."

JPMorgan's underweight rating compares to a Wall Street average rating , SA Authors rating and Quant rating of hold.

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