HUM - Humana cut to Neutral at J.P. Morgan on near-term uncertainty
2023-07-07 08:05:17 ET
J.P. Morgan downgraded health insurer Humana Inc. ( NYSE: HUM ) to Neutral from Overweight on Friday, citing near-term uncertainty and pricing concerns amid political headwinds in the Medicare Advantage market.
While appreciating Humana’s ( HUM ) long-term exposure to MA, the analyst Lisa Gill and the team highlighted their preference for more diversified managed care firms due to the near-term uncertainty surrounding 2023 MA utilization and 2024 pricing.
Citing the upcoming election year, J.P. Morgan sees more volatility in MA-exposed insurers such as Humana ( HUM ) and Alignment Healthcare ( ALHC ) as political rhetoric tends to focus more on Medicare Advantage than on Commercial and Medicaid insurance.
Additionally, the team highlights their valuation concerns, noting that HUM, in terms of 2024 adj. EPS, trades at a 20% premium to the peer average multiple, compared to an average premium of 31% over the past five years.
"We believe the company will continue to trade at a more modest premium until at least 3Q23 earnings when the market gets more visibility into 2024 pricing and membership growth prospects," they added.
J.P. Morgan lowered its price target on Humana ( HUM ) to $540 from $576, mainly to reflect updated 2024 estimates and a lower target multiple.
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Humana cut to Neutral at J.P. Morgan on near-term uncertainty