Why Humana (HUM) Stock Is Dropping Today
Bloomberg News
NEW YORK (TheStreet) -- Shares of Humana (HUM) - Get Report are declining 1.06% to $161.02 in pre-market trading Friday after a report yesterday that antitrust regulators will discuss "significant concerns" related to its proposed merger with health insurer Aetna (AET).
Additionally, JPMorgan downgraded Humana stock to "neutral" from "overweight" and cut its price target to $150 from $196 this morning.
"Of the 'deal stocks', we have long held that only HUM shares have material downside if the DOJ were to block the pending acquisition by Aetna," the firm wrote in an analyst note.
"With three credible sources (MLEX, Reuters & Bloomberg) now citing their own sources that DOJ may seek to block the deal, we can no longer recommend a favorable risk reward scenario for HUM," JPMorgan added.
Aetna's current cash and stock offer values Humana at $222 per share, but that deal now seems likely to be blocked despite Aetna's efforts to divest assets, the firm said.
"If DOJ blocks the deal AET may choose to litigate, the hopes of which might levitate HUM shares closer to our price target, but companies rarely win such challenges so the market will likely ascribe a low probability," JPMorgan added.
Shares of Aetna are lower by 0.25% to $115.18 in pre-market trading on Friday.
Separately, TheStreet Ratings Team has a "Buy" rating with a score of A- on Humana stock.
The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and good cash flow from operations.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: HUM