JMP cuts Evolent Health target to $12, keeps Outperform rating

On Friday, JMP Securities revised its price target for Evolent Health (NYSE:EVH) shares, reducing it from $18.00 to $12.00, while maintaining a Market Outperform rating for the company. Currently trading at $10.18, near its 52-week low of $9.74, InvestingPro analysis suggests the stock is undervalued. The adjustment follows a detailed analysis of Evolent Health's financial outlook, influenced by a mix of revenue and profit challenges.

The firm's analyst, Constantine Davides, cited several factors necessitating a new valuation approach, including contractual rate adjustments, contract migrations, utilization increases, and disruptions in Medicare Advantage enrollment. These elements are anticipated to affect Evolent Health's financial performance in 2025, despite the company's impressive revenue growth of 37.65% over the last twelve months. InvestingPro data shows six analysts have recently revised their earnings estimates downward for the upcoming period.

In light of these headwinds, JMP Securities has adjusted its EBITDA forecasts for Evolent Health for the years 2025 and 2026. The firm now expects EBITDA to reach $161 million in 2025, down from the previous estimate of $215 million, and $185 million in 2026, decreased from an earlier projection of $250 million.

The new price target is based on 11.5 times the revised 2025 EBITDA estimate, a change from the prior multiple of 12 times. This revision reflects the analyst's recalibrated expectations for the company's earnings before interest, taxes, depreciation, and amortization.

Evolent Health's stock was recently trading at a multiple of 10.4 times JMP Securities' EBITDA estimate for 2024, indicating market valuation in light of the firm's current financial trajectory. The Market Outperform rating suggests that despite the lowered price target, JMP Securities remains optimistic about Evolent Health's market performance potential.

In other recent news, Evolent Health has seen multiple adjustments in financial outlooks from different analysts. Canaccord Genuity reduced its price target for the company from $23 to $16, maintaining a Buy rating. This change comes as the company anticipates a rebuilding year in 2025, with a focus on resetting its adjusted EBITDA from a lower starting point. The company remains committed to achieving long-term revenue growth targets of over 15% and an approximate 20% growth in adjusted EBITDA.

Truist Securities also adjusted its outlook for Evolent Health, lowering the price target to $15 due to higher-than-expected utilization levels and uncertainty around December trends. The firm has revised its fourth-quarter EBITDA estimates for the company from $30 million to $24 million.

Stephens analysts revised the price target for Evolent Health, reducing it to $12.00 from $16.00, while maintaining an Equal Weight rating, following an evaluation of the company's fourth quarter performance and future earnings potential.

RBC Capital Markets adjusted its outlook on Evolent Health, reducing the price target to $17 from $20, while sustaining an Outperform rating. This revision came after the company reported success in achieving over $100 million of incremental EBITDA year-over-year through successful re-contracting initiatives.

KeyBanc analysts inferred that Evolent Health's implied 2025 EBITDA could exceed $200 million, a figure notably higher than previously anticipated by investors. Lastly, Needham initiated coverage on Evolent Health with a Buy rating, suggesting the stock is undervalued. These are among the recent developments that have shaped the company's financial outlook.

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