Humana (NYSE:HUM) was cut to Neutral from Overweight at JPMorgan Friday, with analysts cutting the firm's price target on the stock to $540 from $576 per share.
The analysts told investors in a research note that they believe the combination of MA cost trend uncertainty and the election cycle limits the near-term upside for the group.
However, they are still bullish about the company's long-term Medicare advantage opportunity.
"We are bullish on the long-term outlook for HUM as we believe the company is well positioned to drive above-average membership growth in the fastest growing market within managed care over the next several years," they said. "While we like HUM's long-term exposure to MA, we prefer more diversified managed care names over the near-term given uncertainty around 2023 MA utilization and 2024 pricing."
They add that political rhetoric and regulatory scrutiny are more likely to focus on Medicare Advantage than Commercial and Medicaid heading into the 2024 election, which "could result in greater volatility for MA exposed names such as HUM."
"We believe the company will continue to trade at a more modest premium until at least 3Q23 earnings when the market gets more visibility into 2024 pricing and membership growth prospects," they continued.