Anthem stock

Anthem Q2 Profit Doubles Amid COVID-19 Slowdown; Buy With Target Price of $310

Anthem Inc, one of the largest health benefits companies in the United States, reported that its second-quarter profit almost doubled as the ongoing COVID-19 pandemic halted less urgent health care procedures.

U.S. health insurer said its second-quarter net income climbed to $2.28 billion, or $8.91a share, compared to $1.14 billion, or $4.36 per share same period a year ago. Total revenue climbed to $29.3 billion from $25.47 billion. Adjusted net income was $9.20 per share.

The benefit expense ratio was 77.9% in the second quarter ended June 30, a decrease of 880 basis points from 86.7% in the prior-year quarter. The decrease was primarily driven by the deferral of healthcare utilization due to the COVID-19 pandemic, and to a lesser extent, the return of the health insurance tax in 2020, the company said.

Anthem stock last closed 0.5% higher at $265.23, recovered nearly 50% from March 23 low of $171.33.

“Why we are neutral longer-term: At a high level, we believe managed care organizations (MCOs) could trade sideways over the next few months. We think four factors could keep a lid on near-term stock performance 1) don’t expect investors will get paid for very high 2Q results, 2) we remain guarded that Commercial Group disenrollment could accelerate, 3) we see trading risk around a Phase 4 stimulus bill, and 4) we see election risk where Biden’s surge in the polls brings with it a louder discussion of a corporate tax rate hike to 28% from 21% ~negatively impacting managed care organization EPS by 8-9%. HOLD, Price Target $281 ~ 11.6x PE,” noted analysts Jefferies.

Anthem stock forecast

Eleven analysts forecast the average price in 12 months at $337.82 with a high forecast of $423.00 and a low forecast of $281.00. The average price target represents a 27.37% increase from the last price of $265.23. From those 11, eight analysts rated ‘Buy’, three analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $423 with a high of $533 under a bull scenario and $245 under the worst-case scenario. SVB Leerink raised its target price to $325; Jefferies raised its target price to $281 from $271; Stephens upped its price objective to $330 from $310. In May, Suntrust Robinson raised its target price to $320 from $280.

We think it is good to buy at the current level and target at least $310 in the short-term and $420 in a best-case scenario as 100-day Moving Average signals a buying opportunity.

Analyst comment

“Anthem is the largest commercial player with 17% market share and second-largest player in Medicaid and exchanges. Under the helm of new CEO Gail Boudreaux Anthem has been focused on improving its commercial business profitability and gaining share in Medicare Advantage marketplace (from current 5%),” noted Ricky Goldwasser, equity analyst at Morgan Stanley.

“Insourcing of PBM is accretive to earnings and positions Anthem to more effectively compete in the marketplace,” she added.