Baird Lowers Elevance Price Target to $625, Maintains Outperform Rating Despite Near-Term Headwinds

Baird analysts reduced their price target on Elevance (NYSE:ELV) to $625 from $649, while maintaining an Outperform rating.

The analysts noted that the current short-term challenges, such as increased Medicaid utilization in the second half of the year, present a compelling buying opportunity for investors with a long-term perspective. They explained that these headwinds are temporary and will be mitigated by upcoming state rate adjustments aimed at ensuring actuarial soundness.

Despite the near-term issues, the analysts believe Elevance's long-term growth prospects remain robust. They did acknowledge potential headline risks related to the political landscape, specifically the Trump vs. Biden scenario, but expressed confidence that Elevance’s valuation multiple will recover as we approach the end of 2024, thanks to better visibility on Medicaid rates.

Additionally, the analysts slightly lowered the long-term revenue growth compound annual growth rate (CAGR) for 2022-2027, attributing this adjustment to recent Medicaid and Medicare Advantage experiences. They emphasized that this recalibration does not indicate any fundamental growth concerns.