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On Friday, Bernstein analysts, led by Lance Wilkes, maintained an Outperform rating on agilon health Inc (NYSE:AGL) with a steady price target of $7.50. Currently trading at $2.23, InvestingPro data shows the stock is trading below its Fair Value, with analyst targets ranging from $1.00 to $7.50. The stock’s RSI suggests oversold conditions, presenting a potential opportunity for value investors. The firm’s positive stance is based on the strong interest from Managed Care Organizations (MCOs) in value-based care (VBC) solutions provided by agilon health. According to Wilkes, MCOs are increasingly engaging with agilon health’s management team to negotiate contracts, a sign of their commitment to controlling costs and managing margins. Despite challenging market conditions, the company has maintained impressive revenue growth of 23% over the last twelve months, reaching nearly $6 billion.
Agilon health has indicated that its decision to limit growth in 2025 and 2026 is not due to a lack of demand from MCOs but is a strategic move aimed at margin recovery. The company has confirmed its guidance of adding 30,000 to 45,000 new members in approximately 2026. Bernstein analysts believe that VBC is becoming a crucial strategy for Medicare Advantage (MA) plans, particularly for cost control, accurate risk scoring, and quality measures.
The analysts note that agilon health is prioritizing margin recovery and is taking specific actions to progress in its turnaround strategy, which boosts confidence in the company. They also project that agilon health will benefit from the sector’s recovery in Medicare Advantage from 2026 to 2028. This anticipated recovery is further supported by the improved final rate announcement for 2026, coupled with a growing need for VBC by MCOs to enhance cost control and achieve higher quality measures, known as Stars. InvestingPro subscribers can access 8 additional ProTips and a comprehensive analysis of agilon health’s financial health, which currently shows a "GOOD" overall score despite near-term profitability challenges.
In other recent news, Agilon Health reported its Q1 2025 earnings, showcasing a significant outperformance with earnings per share at $0.03, well above the expected $0.0016. Revenue also exceeded projections, reaching $1.53 billion compared to the forecasted $1.51 billion. These results highlight the company’s effective cost management and strategic initiatives, despite a year-over-year decline in Medicare Advantage membership and other financial metrics. Agilon Health’s stock saw a notable rise following the earnings announcement, reflecting investor confidence in the company’s financial performance. The company maintains a cautious yet optimistic outlook for the rest of 2025 and into 2026, with expectations of revenue between $5.85 billion and $6.03 billion for the full year. Strategic investments in technology and AI are anticipated to drive future growth and improve clinical outcomes. During the earnings call, analysts focused on Agilon Health’s strategies for managing drug risks and improving star ratings with payers. The company emphasized its ongoing efforts to enhance operational efficiencies and strengthen payer relationships.
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