Humana Shares Rise After JPMorgan and Goldman Analysts Lift Price Targets

They cite repeal of the health insurer industry fee as the reason for their optimism.
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Shares of Humana  (HUM) - Get Report rose Friday, after analysts at Goldman Sachs and JP Morgan raised their price targets for the stock.

Both analyst teams cited the repeal of the health insurer industry fee as a major factor. The repeal takes effect Jan. 21.

“While the HIF is largely a pass-through expense for the commercial and Medicaid lines of business, it constitutes a material headwind to [Medicare Advantage] benefits/enrollment/margins,” the JPMorgan analysts, led by Gary Taylor, wrote in a report.

“MA benefits/enrollment/margins stand to improve in 2021-22 vs 2020, yet consensus estimates for Humana have not yet reflected this improvement.”

Humana remains a “top pick” with an overweight rating for the JPMorgan analysts.

As for Goldman, its analyst team, led by Stephen Tanal, added Humana to its Conviction List. It already had a buy rating on the stock.

“We update our Humana model for the repeal of the HIF, driving our 2021 adjusted EPS estimate up about 10% to $24.10 from $21.95, 12% above current Thomson Reuters consensus of $21.43,” the Goldman analysts wrote in a report. “The increase reflects the absence of the HIF’s tax burden only.”

The health insurer fee has most seriously affected Medicare Advantage managed care organizations, the Goldman analysts wrote. That will represent an expense of $1.2 billion for Humana in 2020, they said.

Goldman raised its 12-month target price for Humana’s stock to $425 from $397, while JPMorgan lifted the target to $448 from $437.

Humana shares traded at $365.75 late Friday, up 1.2% on a day that the S&P 500 index dipped 0.45%. 

Humana’s stock has soared 45% since Oct. 8 and has gained 30% over the past year.