4. Humana Inc. (NYSE:HUM)
Number of Hedge Fund Holders: 64
Humana Inc. (NYSE:HUM) provides health insurance services and virtual care and telehealth coverage to its members, ranking its as the fourth-best telehealth stock to invest in. Its operations are divided into Insurance and CenterWell segments. The CenterWell segments offer pharmacy solutions, primary care, and home solutions operations. Analysts are bullish on the stock. Since the beginning of April, Morgan Stanley, Baird, Truist, Barclays, and Mizuho have raised their price targets on the company, and it was initiated with a buy at Guggenheim and Wells Fargo.
On March 25, Bernstein analyst Lance Wilkes also maintained a Buy rating on Humana Inc. (NYSE:HUM) and set a price target of $313.00. The analyst said the company is well-positioned to benefit from the stabilizing trends emerging in the recovering Medicare Advantage (MA) and Medicaid margins. This stabilization is expected to decelerate utilization rates to normal levels, making the current valuation attractive for investors.
The analyst also pointed out several emerging catalysts that could positively affect Humana Inc.’s (NYSE:HUM) future performance, including utilization data from hospitals and managed care organizations (MCOs) that are anticipated to dissipate concerns about margin pressure, margin recovery signs in MA and Medicaid, and policy uncertainty reduction. Overall, the analyst has an optimistic outlook on the company’s future, supporting the Buy rating. It takes the fourth spot on our list of the top telehealth stocks to buy right now.
Artisan Mid Cap Value Fund stated the following regarding Humana Inc. (NYSE:HUM) in its Q4 2024 investor letter:
“We were fairly active in Q4, adding four stocks to the portfolio. Our largest new purchase was Humana Inc. (NYSE:HUM), a leading US-managed healthcare company. After a few years of benign costs, mainly related to lower utilization trends during COVID in which the managed care industry enjoyed expanding profits and strong growth, utilization has ticked higher, driving up costs. Due to the timing of annual negotiated repricing for Medicare Advantage (MA) plans, Humana is unable to adjust pricing higher until 2025. In the interim, this is problematic for earnings. Naturally, this has weighed on Humana’s stock price. In the latest quarter, revenues were up 10%, but profits were restrained due to higher utilization. This was mostly anticipated, but given the limited visibility into pricing for the upcoming year, investors remain on edge. Further negative news for Humana came in early October when the company announced that preliminary data provided by the Centers for Medicare & Medicaid Services (CMS) showed that the percentage of Humana’s members enrolled in higher quality MA plans had fallen, which would impact government bonus payments. Humana is working with CMS to appeal the process as the company believes there were potential errors; however, this introduces risk to 2026 and 2027 margin targets. The stock was downabout15%inQ3 and fell another 8% through mid-October after the news regarding the CMS ratings around the time of our initial purchase. Like the market, we appreciate Humana’s current challenges, but we believe the longer-term drivers for the business remain intact.”
