ELV - Elevance Health: Favorable Trends Are Emerging (Rating Upgrade)
2024-06-28 06:26:04 ET
Summary
- Elevance Health issued disappointing guidance for 2024 leading to a downturn in the stock, but favorable trends have started to emerge.
- The managed care business and the health benefits business are both seeing expanding margins and analysis suggests this expansion is sustainable.
- With risks largely mitigated and a DCF generated price target of $627, 18% upside from today, I rate Elevance a strong buy.
I am updating my analysis on Elevance Health (NYSE: ELV ). I had previously rated Elevance Health a buy for the following reasons:
- Elevance Health exceeded guidance for full year 2023, but guidance for 2024 was disappointing.
- There was significant political risk around Pharmacy Benefit Management, which is a significant portion of their profitability.
- Even accounting for the concerns above in a DCF analysis, Elevance Health had a five billion dollar margin of safety on revenue before the price target ($559) was at risk.