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On Tuesday, agilon health Inc (NYSE:AGL), currently trading at $4.25, received a positive assessment from Bernstein SocGen Group, as the firm's analyst Amir Farahan upgraded the company's stock rating from Market Perform to Outperform. Accompanying the upgrade, the price target was significantly increased to $8.50, up from the previous target of $3.30. According to InvestingPro data, the stock has shown remarkable momentum with a 124% year-to-date return, though analyst targets currently range from $2 to $6.
The upgrade is a reflection of Bernstein's growing confidence in agilon health's turnaround plan and its cash position. Farahan's remarks underscored this optimism, "Our upgrade reflects our improved confidence in AGL turnaround plan and cash position. When we launched on AGL in December, we said we like AGL LT growth potential, but need to see evidence of the turnaround plan working." InvestingPro data supports this view, showing the company holds more cash than debt on its balance sheet, with a healthy current ratio of 1.27.
Since the initial coverage in December, Bernstein has observed several indicators that bolster their belief in the effectiveness of the company's strategic initiatives. These developments have led to a reassessment of the associated risks, particularly concerning the need for additional capital. Farahan noted, "Since then, we have received several data points that increase our confidence in the turnaround plan, thus lowering risk of a capital rise." The company, with a market capitalization of $1.75 billion, has demonstrated strong revenue growth of 40% over the last twelve months, though InvestingPro analysis indicates challenges remain with profitability metrics.
The analyst also cited the recovery in the Medicare Advantage (MA) industry as a contributing factor to the improved outlook. This has influenced Bernstein's decision to adjust the cost of equity in their Discounted Cash Flow (DCF) model, resulting in an increased price target that suggests a potential upside of approximately 100%.
Agilon health's stock is now anticipated to perform better than previously expected, as Bernstein's revised price target and stock rating indicate an optimistic view of the company's future financial performance. The new price target of $8.50 represents a substantial increase and reflects the firm's confidence in agilon health's strategic direction and market potential.
In other recent news, Agilon Health reported a mixed financial performance for the fourth quarter of 2024, with revenue reaching $1.52 billion, a 44% increase year-over-year, but an earnings per share (EPS) of -$0.26, missing the forecasted -$0.22. This revenue growth was attributed to the expansion of Medicare Advantage and ACO Model memberships. Despite these gains, the company faced challenges with its earnings, reflecting ongoing operational and market pressures. Analyst firms have shown varied responses to Agilon Health's outlook. Truist Securities maintained a Hold rating while lowering revenue forecasts for 2025 and 2026, projecting revenues of $5.9 billion and $6.2 billion, respectively. Benchmark analysts, however, raised the stock's price target to $4.00, maintaining a Buy rating, and noted Agilon Health's strategic moves, including exiting unprofitable partnerships and renegotiating payer contracts. Stifel also adjusted its price target to $3.00, emphasizing Agilon Health's shift towards profitability over growth for 2025. These developments come as the company aims to achieve cash flow breakeven by 2027, with a focus on cost management and clinical program enhancements.
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