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Investing.com - Morgan Stanley (NYSE:MS) downgraded Centene (NYSE:CNC) from Overweight to Equalweight and slashed its price target to $33.00 from $70.00 on Thursday. The stock, currently trading near its 52-week low of $31.78, appears undervalued according to InvestingPro Fair Value metrics, despite trading at an attractive P/E ratio of 4.9x.
The downgrade follows significant pressure observed in Centene’s Health Insurance Exchange (HIX) business, where Wakley first look data showed results "significantly different from the company’s expectations," according to Morgan Stanley. InvestingPro data reveals that 7 analysts have recently revised their earnings estimates downward, with the company’s 2025 EPS now forecast at $3.19. Get access to 14+ additional exclusive ProTips and comprehensive analysis with InvestingPro’s detailed Research Report.
The investment bank lowered its 2025 earnings per share estimate for Centene to $3.78 from $7.35, reflecting anticipated challenges in both the company’s Commercial and Medicaid segments. Morgan Stanley adjusted its segment Medical (TASE:BLWV) Loss Ratio (MLR) forecasts to 86.0% for Commercial (from 80.5%) and 92.3% for Medicaid (from 92.1%).
Morgan Stanley expects the challenges in Centene’s Commercial business to persist into 2026, adopting what it calls "a prudent approach" while awaiting evidence of successful repricing in the Exchange book.
The new $33 price target is based on an 8.0x price-to-earnings multiple on 2026 earnings, reflecting both the lower earnings outlook and "reduced visibility" on the company’s performance.
In other recent news, Centene Corporation has withdrawn its 2025 financial guidance, citing significant challenges in its Marketplace business and Medicaid. This decision follows preliminary data indicating higher-than-expected market morbidity, leading to a projected $1.8 billion reduction in expected risk adjustment revenue transfers. Wolfe Research, maintaining a Peerperform rating, noted that these issues could result in an overall impact of approximately $2.5 billion on earnings. Despite these challenges, Truist Securities reiterated a Buy rating on Centene, highlighting positive performance in its Medicare Advantage and Prescription Drug Plan segments. Meanwhile, Cantor Fitzgerald lowered Centene’s stock price target to $65, reflecting decreased earnings projections due to these ongoing pressures. In other developments, Canada Nickel Company reported positive exploration results at its MacDiarmid property, with significant nickel mineralization identified over a substantial area. The company plans to release initial resource estimates for additional properties soon. Additionally, TD Cowen maintained its Buy rating on CVS Health (NYSE:CVS), suggesting limited exposure to risks affecting Centene, due to CVS’s diversified revenue mix.
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