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On Tuesday, Stifel analysts updated their outlook on Alignment Healthcare Inc (NASDAQ: ALHC), increasing the price target from $18.00 to $23.00, while maintaining a Buy rating on the company's stock. The company's shares, currently trading at $17.82, have demonstrated remarkable momentum with a 271% return over the past year. According to InvestingPro data, the stock is trading near its 52-week high of $18.97, with 8 more real-time insights available to subscribers. The adjustment follows the release of the Centers for Medicare & Medicaid Services (CMS) Final Rate Notice for 2026, which was announced to be 283 basis points higher than the Advance Rate Notice issued in January. This rate significantly exceeded the market expectations that predicted an increase of 50 to 100 basis points.
The higher CMS rates come after incorporating data from the fourth quarter of 2024 and suggest a positive outlook for Medicare Advantage (MA) plans. Stifel's analysis indicates that Alignment Healthcare has successfully gained market share over the last two Annual Enrollment Periods (AEPs), benefiting from the decline in star ratings of competitors, as well as their squeezed margins which led to cutbacks in benefits and members. This market share growth has contributed to impressive revenue growth of 48.25% in the last twelve months, though InvestingPro analysis shows the company operates with moderate debt levels and is yet to achieve profitability.
Despite the favorable CMS rates, Stifel anticipates challenges ahead for Alignment Healthcare in attracting new members. With competitors likely to maintain or enhance benefits in 2026 due to the higher rates, the firm expects that fewer members will be inclined to switch MA plans, which could make member growth more challenging compared to the growth seen in 2024 and 2025.
Stifel has revised its 2026 estimates for Alignment Healthcare to reflect slightly lower member growth. However, this is offset by anticipated higher per-member-per-month (PMPM) rates and a quicker expansion of EBITDA margins. With the company's next earnings report due on May 1, 2025, InvestingPro subscribers can access a comprehensive analysis of ALHC's financial health, including detailed profitability metrics and growth projections. Consequently, the firm's net EBITDA forecast for 2026 has been increased from $103 million to $123 million, leading to the raised price target for the healthcare company's stock.
In other recent news, Alignment Healthcare reported strong financial performance for the fourth quarter of 2024, surpassing analysts' expectations with an EPS of -0.16 compared to the forecast of -0.18. The company's revenue also exceeded projections, reaching $701.2 million against the expected $674.97 million. This performance highlights the company's ability to consistently exceed market predictions. Piper Sandler and Raymond (NSE:RYMD) James both raised their price targets for Alignment Healthcare, with Piper Sandler setting a target of $21 and Raymond James at $19, reflecting confidence in the company's growth prospects. Piper Sandler maintained an Overweight rating, while Raymond James reiterated a Strong Buy rating.
Additionally, Alignment Healthcare achieved its first year of adjusted EBITDA profitability, a significant milestone for the company. The company provided guidance for 2025, projecting revenue between $3.72 billion and $3.78 billion, marking a 40% year-over-year growth at the midpoint. Membership growth was also notable, with a 59% increase in 2024, driven by expansion beyond California. Looking ahead, the company anticipates its Health Plan Membership to reach between 227,000 and 233,000 members by the end of 2025, representing approximately 35% growth from January 2025's 209,900 members. The company's strategies, including a focus on high Star Ratings, are expected to contribute to better member retention and lower customer acquisition costs.
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