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On Wednesday, Truist Securities adjusted its financial outlook for Evolent Health (NYSE:EVH), lowering the price target on the company's shares to $15 from the previous $20, while still maintaining a Buy rating. The revision comes in response to the company's higher-than-expected utilization levels in November and the uncertainty around December trends.
The stock, currently trading at $10.17, has experienced significant pressure, falling 67% over the past year and now trading near its 52-week low of $9.88. According to InvestingPro analysis, the company appears undervalued at current levels.
Truist Securities has scaled back its fourth-quarter EBITDA estimates for Evolent Health from $30 million to $24 million, which is below the company's guidance range of $22 to $37 million and the consensus estimate of $28 million. The adjustment is attributed to the lack of a detailed profitability breakdown by business segment, but the firm notes that the fourth quarter of 2024 should serve as a baseline for projecting into the next year.
Despite the adjustments, the analyst remains optimistic about the company's future, highlighting the complexities of forecasting due to factors such as seasonality and the recording of MSSP profitability. Evolent Health itself has suggested that using the fourth quarter as a reference point is appropriate, given the increased utilization observed throughout the year and the effects of Medicaid redeterminations on earnings across various segments.
The analysis by Truist Securities divides Evolent Health's business into four main segments: Performance Suite, which includes MSSP & Evolent Care Partners; Tech & Services; Case Rate, covering IPG & Vital Decisions; and Evolent Health Services, the administrative business.
For the fourth quarter, the analyst projects an EBITDA drag of $15 million from Performance Suite, with positive contributions of $22 million from Tech & Services, $9 million from Case Rate, and $8 million from Evolent Health Services.
These figures are anticipated to form a baseline EBITDA of approximately $95 million for the full year 2025.
In other recent news, Evolent Health has experienced a series of significant developments.
Stephens analysts revised the price target for the company, reducing it to $12.00 from $16.00, while maintaining an Equal Weight rating. This adjustment followed an evaluation of the company's fourth quarter performance and future earnings potential. Evolent Health's transition to version 2.0 of its Performance Suite and strong revenue growth of 37.65% over the last twelve months were highlighted, despite tempered expectations for fourth-quarter profitability in 2024.
RBC Capital Markets also 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.
However, higher than expected oncology trends and membership declines due to the termination of Medicare Advantage plans by several clients were noted as potential challenges.
KeyBanc analysts inferred that Evolent Health's implied 2025 EBITDA could exceed $200 million, a figure notably higher than previously anticipated by investors. Meanwhile, Needham initiated coverage on Evolent Health with a Buy rating, suggesting the stock is undervalued.
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