The rise and fall of health care stocks is often hard to grasp, particularly in a world where the health care laws are creating some large potential winners and losers. Many investors guessed that health care stocks and insurance providers would be crushed under the Affordable Care Act (ACA), or Obamacare, but now some of the companies have seen their stocks hit new highs.
This week brought two incredible health care analyst calls from a broader sector call out of Sterne Agee — and two of the stocks were given upside averaging 50%.
Can health care stocks really rise 50% in this new environment? At least one analyst seems to think so. Sterne Agee’s Brian Wright published new Buy ratings on Molina Healthcare Inc. (NYSE: MOH) and on Health Net Inc. (NYSE: HNT), with an average upside potential of 50% or so.
Molina Healthcare Inc. (NYSE: MOH) was started with a Buy rating and was given a $69 price target at Sterne Agee. This represents more than 50% implied upside from the prior $44.22 close, and shares ended the week at $44.58.
Wright said in his report that his upside is based on shares not fully reflecting normalized earnings power. He also believes that investors are effectively receiving post-2015 top-line growth for free.