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Barclays launched its coverage on several U.S. managed care companies, citing a cautious view on the sector, primarily tied to Medicare, the federally supported health program for seniors, where companies such as UnitedHealthcare (NYSE:UNH) and Humana (NYSE:HUM) dominate.
Both titles came under pressure earlier this year, along with its rivals, CVS Health (CVS) and Healthcare Alignment (ALHC), after the companies cited a higher-than-expected increase in the medical sector costs during the fourth quarter.
“Repayment challenges, rising cost trends and slowing senior growth make the MA investment case less compelling now than at any point in the past decade,” Barclays analyst Andrew Mok wrote.
In February, UNH and HUM stocks fell again after 2025 Medicare reimbursement rates indicated a 0.2% decline for Medicare Advantage plans and Part D programs.
However, Mok has a neutral view on the industry, biased positively toward companies with a mix of earnings exposed to both commercial insurance and marketplaces established as part of the Affordable Care Act (ACA).
“10 years after implementing the ACA, the individual market is the fastest growing (+30% y/y) and one of the most profitable end markets,” Mok wrote, citing Centene (CNC) and Cigna (CI ) as two markets of Barclay’s best ideas. The company has Overweight ratings on the duo, with price targets of $101 and $393 per share, respectively.
Its notable stocks with equal-weight ratings include CVS (CVS) and Humana (HUM), and the company is Underweight ALHC, on which it has a $4.50 per share target. Barclay’s price targets on CVS and HUM are $78 and $356 per share, respectively.
Additionally, Mok floated Medicaid-leveraged Molina Healthcare (MOH) with an equal-weight rating and a $437 target, arguing that its stock price already reflects “its improved EPS growth prospects,” which he said it deserved a “premium rating”. “
Meanwhile, UnitedHealth (UNH) and Elevance Health (ELV) earned Overweight ratings with price targets of $551 and $584 per share, respectively.
“We believe UNH is best positioned to navigate the complex Medicare environment over a multi-year timeframe,” the analyst added, highlighting Elevance Health’s (ELV) lack of exposure to the Medicare market to support its bullish thesis.