ELV: Margin Recovery From Medicaid Pressures Will Unfold Amid Regulatory Shifts

Analysts have raised their price target for Elevance Health by approximately $1 to $387, citing expectations for steady growth along with a balanced outlook for earnings and margin recovery in a challenging managed care environment.

Analyst Commentary

Elevance Health has attracted a range of perspectives from Wall Street as analysts weigh recent developments, upcoming regulatory challenges, and the company’s outlook for earnings growth and operational recovery. These views are reflected in recent price target adjustments and ratings updates.

Bullish Takeaways

• Bullish analysts are raising price targets. Several now expect shares to reach $400, citing Elevance Health's status as a top pick for 2026.
• Current earnings per share consensus for 2026 is seen as reasonable and forms a foundation for anticipated multi-year growth.
• Some believe that the managed care sector's complex environment creates opportunities for companies with strong execution. Elevance's performance across non-Medicaid business lines remains stable.
• Increased exposure to Medicare Advantage is viewed favorably. A recovery phase is projected to begin in 2026, with longer-term margin improvement on the horizon.

Bearish Takeaways

• Bearish analysts have cited ongoing membership pressure in Medicaid, Medicare Advantage, and the health insurance exchange due to regulatory headwinds and potential changes to advanced premium tax credits.
• There are concerns about persistent cost pressure in Medicaid, higher-than-expected acuity levels, and limited visibility into margin recovery in the second half of 2025.
• Some forecasts for 2026 and 2027 have been trimmed to reflect anticipated headwinds, including regulatory-driven membership shifts and less optimistic earnings assumptions compared to consensus.
• The managed care industry is described as entering its most significant underwriting downturn in over 15 years. A slower cyclical recovery is expected in Medicaid and exchange businesses compared to Medicare Advantage.

What's in the News

• Speaker Mike Johnson has warned that House Republicans oppose extending enhanced Affordable Care Act subsidies, as President Trump's advisers prepare a plan to extend the subsidies by two years (Wall Street Journal).
• The White House is expected to introduce a two-year extension of Obamacare subsidies, including new eligibility limits, to prevent premium increases for ACA enrollees if Congress does not act (Politico).
• Facing Congressional backlash, the White House has postponed an announcement on healthcare policy changes that would have included extending ACA subsidies (MS Now).
• About 24 million Americans enrolled in ACA health plans are receiving notices about a 26% average premium increase for 2026, according to recent rate releases (Wall Street Journal).
• Decisions about extending ACA health-insurance subsidies are central to ongoing negotiations to end a potential government shutdown. There are 22.4 million ACA enrollees currently receiving subsidies (Wall Street Journal).

Valuation Changes

• Fair Value Estimate has risen slightly from $386.11 to $387.16, reflecting updated analyst expectations.
• Discount Rate has decreased marginally from 6.96% to 6.96%, indicating a nearly unchanged risk assessment.
• Revenue Growth expectations remain steady, with a very modest increase from 3.45% to 3.46%.
• Net Profit Margin is virtually unchanged, moving from 3.43% to 3.43%.
• Future Price/Earnings Ratio (P/E) has risen from 12.43x to 13.24x, suggesting a higher valuation for projected earnings.