On Wednesday, Guggenheim initiated coverage on shares of Elevance Health Inc. (NYSE:ELV), formerly known as Anthem Inc., with a Buy rating and a price target of $518.00. Currently trading at $430.90, InvestingPro analysis suggests the stock is undervalued, with the company maintaining a "GREAT" overall financial health score of 3.15 out of 5. The firm believes that Elevance’s strategic use of the Blue Cross Blue Shield (BCBS) brand, its effective diversification across all end-markets, and its strong presence in both the commercial and Medicaid sectors, along with the growth of its services organization, Carelon, place the company in a strong and defensible position. This positioning is expected to help Elevance mitigate potential headwinds and drive favorable earnings growth.
The analyst from Guggenheim acknowledged the near-term margin pressures Elevance faces, including Medicaid rate and acuity mix pressures, a shift in government mix, and the impacts of acquisitions. Supporting this optimistic outlook,
The report also highlighted Elevance’s ability to leverage selling, general, and administrative (SG&A) efficiencies to offset some of the current fiscal pressures. The firm views the healthcare company’s headwinds as temporary and believes that Elevance’s broad market reach and growth in its services sector provide a strong foundation for future performance.
Looking ahead, Guggenheim anticipates that Elevance’s capital deployment strategies and the potential for further expansion in Medicare Advantage and services will contribute to the upside potential. This could lead to surpassing the company’s long-term earnings per share (EPS) growth target of over $12. The firm’s initiation of coverage with a Buy rating reflects confidence in Elevance’s business strategy, growth prospects, and what is considered an attractive valuation at the current levels. Adding to the investment case,
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