Covid-19 is receding across the U.S., with new cases down 36% over the last two weeks and the number of hospitalizations at the lowest level since the pandemic began last April.
That’s good news for Americans, and for companies in sectors from retail to travel to medical devices. It may not be so good, however, for shares of the health insurer
That’s according to a note out early Thursday from RBC Capital Markets analyst Frank Morgan, who downgraded Anthem shares to Sector Perform, from Outperform. Morgan wrote that the use of healthcare services will rise as the pandemic eases, and Anthem may not be able to cope as well as other large insurers.
“As healthcare demand recovers post-COVID, we expect increased utilization to have an outsized impact on ANTM versus peers,” Morgan wrote.
Morgan maintained his target price of $399. The stock closed Wednesday at $385.96.
Shares of Anthem were flat in premarket trading Thursday. The stock fell 1.2% on Wednesday, but is up 20.2% so far this year.
Anthem didn’t immediately respond to a request for comment on the downgrade.
In his note, Morgan wrote that healthcare demand, which has been suppressed during the pandemic, is set to return. He says that companies like
(HUM) will be better prepared to absorb that demand.
“ANTM does not have a natural provider hedge to help offset elevated [medical loss ratios] as healthcare demand returns,” Morgan wrote.
What’s more, he says that the stock appears to be “fully priced” in the context of its historical trading levels. The stock trades at 14.5 times earnings expected over the next 12 months, according to FactSet, just above its 5-year average of 13.6 times earnings.
“Our rating revision does not reflect any negative change in fundamentals or change in estimates,” Morgan wrote. “Rather, we simply do not see any imminent catalysts for further multiple expansion beyond current levels.”
Anthem shares have climbed sharply in recent months, and are up 30% since February. The
is up 14.2% over the same period.
Of the 24 analysts tracked by FactSet who cover Anthem, 18 rate the stock a Buy or Overweight, while six rate it a Hold.
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