Wall Street sees new upswing for health insurers after years of margin pressure
Investing.com -- Analysts turned more bullish on the managed care sector, upgrading shares of Humana, Centene, and Elevance Health to “Buy,” while downgrading The Cigna Group to “Hold” on valuation concerns.
The upgrades reflect growing confidence that managed care organizations (MCOs) are entering a recovery phase after several years of pressure from rising Medicare and Medicaid costs. Analysts said insurers have finally adapted to the industry’s “rate-chasing-risk” cycle and are now positioned to rebuild margins through stronger underwriting and more disciplined product pricing.
The broader shift in outlook marks a notable change in sentiment after several years of caution toward health insurers. Analysts said they are now taking a more constructive stance on the sector as pricing discipline improves and margin recovery becomes increasingly visible.
The note suggested that healthcare utilization trends — a major source of cost inflation for insurers — may have peaked, allowing companies to better manage pricing against higher medical costs.
Shares of Humana were upgraded to Buy, with the price target raised sharply to $441 from $235. The new target is based on 12 times the firm’s revised 2028 earnings estimate of $36.74 per share, which now factors in a recovery in Medicare Star Ratings performance.
Analysts believe 2026 could represent an earnings bottom and “rebasing” year for Humana, although they cautioned that the company still faces significant uncertainty tied to its Stars ratings outcome, expected in October 2026.
Centene was also upgraded to Buy from Hold, with the price target increased to $80 from $53. The valuation is based on 12 times the company’s projected 2028 earnings of $6.70 per share.
Although analysts lowered the valuation multiple from 15x to 12x, they said the adjustment reflects the longer time horizon needed for the company’s earnings recovery to fully materialize beyond 2027.
Analysts upgraded Elevance Health to Buy and lifted the target price to $498 from $363, representing 14.5 times projected 2028 earnings of $34.34 per share.