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Humana's analyst price target has fallen from approximately $299 to $293 per share, as analysts cite ongoing challenges in Medicare Advantage star ratings and a more cautious growth outlook. This comes despite recent plan diversification efforts.

Analyst Commentary

Recent analyst updates on Humana reflect a balanced mix of optimism and caution as the company navigates shifting Medicare Advantage dynamics and regulatory uncertainties. Price targets for Humana have notably fluctuated in recent months, signaling varied outlooks on near-term execution, long-term growth, and valuation prospects.

Bullish Takeaways

• Analysts highlight Humana’s plan diversification, particularly the promotion of new growth into higher-rated contracts. This is seen as a proactive step to mitigate concentration risk and capture new membership.
• Some view the recent pullback in share price as creating a more attractive entry point. Medium-term valuation multiples appear reasonable given Humana’s growth profile and the potential for future stars bonus recovery.
• Strong net promoter scores and positive internal patient experience surveys point to effective member engagement and retention. These factors support the case for a rebound in stars performance and membership recapture.
• The company’s reaffirmation of earnings guidance, despite lower star ratings, underscores confidence in its ability to execute through operational headwinds and manage expectations around future growth.

Bearish Takeaways

• Several analysts have lowered their price targets, citing persistent challenges in achieving top-tier Medicare Advantage star ratings and a less robust outlook for sector-wide growth.
• Concerns remain about adverse selection risk if Humana accelerates growth in certain plan types, which could potentially dampen profitability and weigh on long-term returns.
• Regulatory uncertainty, such as unsettled legal disputes over risk adjustment and changes in audit protocols, continues to cast a shadow over Humana's ability to predict future payments and plan appropriately.
• Some analysts caution that near-term earnings improvement may be delayed by an unclear reimbursement outlook and increased difficulty in achieving favorable stars cut points across the industry.

What's in the News

• Federal judges in Texas and Connecticut dismissed cases challenging the constitutionality of the Medicare Drug Price Negotiation Program. This signals continued headwinds for the pharmaceutical industry. (The Hill)
• Renewal of key health insurance subsidies is at the center of negotiations to end a government shutdown. More than 22 million Americans could be impacted if Affordable Care Act subsidies expire. (Wall Street Journal)
• Insurers, including Humana, are seeking double-digit rate increases for ACA marketplace plans for 2026. Rising healthcare costs and anticipated subsidy reductions are noted as key drivers. (Wall Street Journal)
• Humana lost its lawsuit seeking to reverse recent cuts to Medicare Advantage bonus payments. (Bloomberg)
• Prescription drug denials by private U.S. health insurers have increased from 18.3% to 22.9% since 2016. Automation and new therapies are cited as contributing factors. (New York Times)

Valuation Changes

• Fair Value: The estimate dropped modestly from $298.95 to $292.87 per share, reflecting a slightly lower long-term valuation.
• Discount Rate: This remains unchanged at 6.8%, indicating stable risk assumptions in the model.
• Revenue Growth: The figure increased from 7.02% to 7.39%, suggesting a marginally stronger forward outlook for top-line expansion.
• Net Profit Margin: This decreased slightly from 2.18% to 2.16%, pointing to a minor contraction in projected profitability.
• Future P/E: The value declined from 13.15x to 12.88x, indicating a lower valuation multiple applied to expected future earnings.