Agilon Health stock target raised to $4 by Benchmark

On Thursday, Benchmark analysts increased the price target on Agilon Health Inc (NYSE:AGL) shares to $4.00 from the previous $3.00, while maintaining a Buy rating. The analysts highlighted Agilon Health’s fourth-quarter results, which aligned with expectations, and provided a conservative forecast for the fiscal year 2025 (FY25). According to InvestingPro data, the company’s stock is currently trading below its Fair Value, with analyst targets ranging from $2.00 to $6.00. Despite impressive year-to-date returns of nearly 77%, the company faces profitability challenges, as indicated by its negative EBITDA of -$259.5 million in the last twelve months.

Agilon Health recently reported a quarter that met analysts’ projections and issued guidance for FY25 that suggests a year of transition. The company expects to see a reduced Adjusted EBITDA loss, which is more optimistic than the consensus estimates. This comes as Agilon Health plans to leave two unprofitable physician partnerships and anticipates a roughly 4% decrease in Medicare Advantage (MA) membership. However, it also expects to gain approximately 20,000 new members through new physician partnerships, which includes downside protection in the first year with some payers. InvestingPro analysis shows the company maintains a healthy current ratio of 1.27 and holds more cash than debt on its balance sheet, providing financial flexibility during this transition period.

The company is also in the process of renegotiating existing payer contracts, aiming to decrease Medicare Part D exposure to less than 30% of members, adjust the percentage of premiums, and boost quality incentives. Alongside these strategic moves, Agilon Health is working on enhancing clinical and operational programs.

Benchmark’s analysts believe Agilon Health is adopting a cautious approach to risk for FY25. This includes assumptions of continued high cost trends and expectations that Part D losses will double for the less than 30% of members who are on plans without Part D caps. Despite these challenges, the company is expected to manage costs effectively and maintain solid working capital management, guiding to a cash balance of $330 million at the end of the year, which is about $75 million better than previously anticipated.

Looking ahead to fiscal year 2026 (FY26), while there will be additional headwinds from the remaining V28 step-up (approximately 4%) affecting payments, and cost trends are uncertain, early signs from the 2026 advance rate notice are promising. Benchmark analysts remain optimistic that Agilon Health can achieve a positive Adjusted EBITDA. The management team at Agilon Health continues to target cash flow break-even by fiscal year 2027 (FY27). For deeper insights into Agilon Health’s financial health and growth potential, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company’s operational metrics, valuation, and growth prospects among 1,400+ top US stocks.

In other recent news, Agilon Health has reported its fourth-quarter 2024 earnings, showing a notable 44% increase in revenue year-over-year, reaching $1.52 billion. However, the company faced challenges with its earnings per share (EPS), reporting a loss of $0.26, which was larger than the expected loss of $0.22. For the full year, Agilon Health’s revenue reached $6.06 billion, marking a 40% growth from the previous year. Analysts at Stifel have adjusted their outlook on Agilon Health, raising the stock price target from $2.00 to $3.00, while maintaining a Hold rating. This adjustment reflects a shift in the company’s strategy towards emphasizing profitability over growth for 2025. The company plans to add 20,000 new members while reducing its Part D exposure to mitigate risk. Agilon Health also aims to implement $50 million worth of operating, quality, and clinical initiatives in 2025, with a significant portion focused on enhancing quality performance. Despite these strategic moves, the company’s stock experienced a decline in after-market trading.

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