On Friday, Citi analyst Daniel Grosslight upgraded agilon health Inc (NYSE:AGL) stock rating from Sell to Neutral, adjusting the price target to $2.25, up from the previous $2.25. The revision reflects a shift in the perceived risk and potential of the company's stock, which has fallen over 72% in the past year. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis, despite facing significant challenges.
Grosslight's upgrade is predicated on the belief that the current stock price now fully accounts for the significant risks agilon health faces, particularly concerning contract renegotiations in 2025. He suggests that the likelihood of further downside is limited, which has prompted the change in rating to Neutral with a High Risk designation. InvestingPro analysis reveals the company maintains a GOOD financial health score, though it's currently burning through cash rapidly - one of several key insights available to Pro subscribers.
The analyst also notes the possibility that the Trump administration, potentially with Dr. Mehmet Oz at the helm of CMS, could introduce policies more favorable to Medicare Advantage, possibly leading to more significant rate increases. This scenario could benefit agilon health, which operates in the healthcare sector.
However, Grosslight tempers his optimism with caution regarding potential increased scrutiny on Medicare Advantage coding practices by the Department of Government Efficiency (DOGE), aiming to eliminate waste. He believes that this could offset some of the potential positives from policy changes.
With an improving macro-environment and limited downside risk, Grosslight sees it fit to not only upgrade the stock but also to raise the price target. This new price target is based on a 1.25x medical margin multiple applied to Citi's below consensus Fiscal Year 2026 estimate, a slight increase from the previous 1x multiple.
This adjustment reflects a slightly more favorable macro-environmental assessment for agilon health. The company has shown strong revenue growth of 54% over the last twelve months, though analysts remain cautious, with a consensus recommendation of 2.95 out of 5. For deeper insights into agilon health's valuation and prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, agilon health has been under the spotlight following a series of analyst ratings and financial updates. Macquarie initiated coverage on the company with a Neutral rating, citing market challenges and a tempered growth outlook due to high healthcare utilization and adverse claims developments. Similarly, Bernstein SocGen Group started coverage with a Market Perform rating, awaiting signs of improved performance in the wake of financial strain.
Jefferies reduced its price target for agilon health while maintaining a Hold rating, reflecting anticipation for more substantial measures to achieve profitability and positive cash flow. The company's Q3 financial report revealed a 28% YoY revenue increase, reaching $1.45 billion, but fell short of the projected $1.47 billion. However, agilon health experienced an adjusted EBITDA loss of $96 million, which led to TD Cowen reducing the company's price target and JMP Securities downgrading the stock rating.
In a strategic move, agilon health updated its indemnification agreements and relocated its headquarters to Westerville, Ohio. Despite financial challenges, the company reported a 37% YoY growth in Medicare Advantage membership and revised its full-year 2024 adjusted EBITDA guidance downward, indicating potential financial challenges ahead.
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