Goldman Sachs’ analysts recommend buying Humana now

Humana is a health insurance company that has faced newer entrants in the Medicare Advantage (MA) market. According to Goldman Sachs’ analysts, its mix of business along with its sheer size makes the company a stand-out. It got a strong-buy rating recently.

Analyst Robert Jones thinks that Humana’s scale, brand reputation, and infrastructure will propel the company to continue gaining its share in the fastest-growing vertical of Managed Care. According to him, continued growth in this end-market can have a more pronounced impact on Humana’s bottom line versus other managed care organizations considering Humana’s more concentrated exposure to MA.

So far, MA has mostly managed to escape the impacts of the coronavirus pandemic. And the company’s exposure within the MA space has been an attractive value proposition due to the secular growth drivers that are present now. However, the segment looks even stronger currently.

What are the company’s other strengths?

That isn’t the company’s only advantage. The firm also has an excellent primary care strategy. As part of its approach, Humana has opened senior-focused and payor-agnostic primary care centers. There are currently 260 of them. But the company has stated that another 35 will open in 2020.

Jones noted that the opportunity from these centers is threefold. They could help the company recruit and retain MA members, recognize long-term EBITDA growth from the providers, and increase the profitability of the managed members under these value-based arrangements. As you see, its primary care strategy could be a meaningful growth lever for the firm.

Still, analysts have considered the possibility of stronger growth and retention, along with improved member profitability as the most meaningful impact.

Overall, the company is on track for serious gains—Jones set his price target at $510. If the target is met, the stock will gain 31% in the next year.

Wall Street analysts also gave this stock a Buy rating. However, the average price target is $435.50 per share, and it brings the upside potential to 12%.