Centene (CNC) stock is undervalued, now that the company has laid out building blocks on how to operate if enhanced affordable care act, or ACA, exchange subsidies expire after 2025, UBS said Friday.
Centene expects a 30% drop in ACA exchange enrollment from 2025, creating a $1 earnings per share headwind for 2026, UBS said in the note, which is conservative compared to its peers. However, the brokerage expects the enrollment decline to be offset partially by 15% per-member-per-month, or PMPM, growth.
The firm also expects Medicaid medical loss ratio to improve in 2026 and Medicare to achieve breakeven by 2027.
"We continue to believe Medicaid rates will improve as states are mandated to pay actuarially sound rates," UBS said. "The rate update for 2025 would suggest states are taking notice and further benefits from repricing will annualize into 2026 as well."
The firm upgraded Centene to buy from neutral with a raised price target to $80.
Centene shares were up more than 3% in recent trading.
Price: 60.03, Change: +2.03, Percent Change: +3.50
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