The stock jumped after unnamed sources told The Wall Street Journal the Louisville, K.Y.-based insurance giant is weighing a sale and has been in talks with insurers Aetna (AET) and Cigna (CI) - Get Report. The Journal also reported Humana is working with Goldman Sachs (GS) - Get Report as it mulls a takeover.
In 2014, Humana covered almost 14 million members, making the insurer an attractive target for another insurance company looking to expand their reach, according to Morningstar analyst Vishnu Lekraj.
"A deal has most likely been in the works for a while," he said. "A lot of analysts, including myself, expected something to happen with Humana given the opportunity for some larger insurer to add to their medical membership and diversify what they have."
He also said how the deal could help Humana, which he says is at a disadvantage because it is "very reliant on Medicare, which is facing reimbursement pressure from the government," referring to increased regulation and cost cutting measures in Medicare amid the Affordable Care Act.
A spokesperson from Humana did not immediately return TheStreet's request for comment.
At $212.69 per share, Humana trades at roughly 28 times above its pre-share earnings last year, according to data compiled by Bloomberg. Morningstar maintains a sell rating while the analysts at Oppenheimer & Co hold an outperform rating and Stifel analysts maintain a buy rating.
Trading volume was particularly heavy for Humana on Friday. Some 8.9 million shares traded hands, compared to its average volume of 1.3 million shares. Shares of Humana rose 49% since the start of the year, compared to Cigna's 37% rise and Aetna's 33% increase.
TheStreet Ratings team rates HUMANA INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate HUMANA INC (HUM) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, increase in net income and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
You can view the full analysis from the report here: HUM Ratings Report