What Happened?
Shares of health insurance provider Elevance Health (NYSE: EVH) jumped 3% in the morning session after Wolfe Research upgraded the stock's rating to Outperform from Peerperform and set a price target of $425.
The research firm cited a "compelling path forward" for the health insurer. Wolfe Research believed its 2026 estimates established a likely bottom in numbers for Elevance, which it viewed as the first step in improving sentiment for the company. The firm also identified several potential growth areas, including Medicare Advantage and Medicaid. Adding to the positive sentiment, Wells Fargo also raised its price target on the stock to $424 from $403 while maintaining an 'Overweight' rating.
After the initial pop the shares cooled down to $377.39, up 2.9% from previous close.
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What Is The Market Telling Us
Elevance Health’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 11.5% on the news that the company reported its second-quarter results and cut its full-year profit guidance, citing rising medical costs.
The health insurer announced second-quarter adjusted earnings of $8.84 per share, which missed Wall Street's expectation of $9.16 per share. While revenue of $49.42 billion beat forecasts, the company's net income declined to $1.74 billion from $2.30 billion in the same quarter last year. The key concern for investors was the significant reduction in the company's full-year 2025 profit outlook. Elevance now expects adjusted earnings per share of approximately $30.00, a substantial cut from its previous forecast of $34.15 to $34.85. Management attributed the downgrade to "elevated medical cost trends" in its Medicaid and Affordable Care Act (ACA) health plans. This was reflected in a higher benefit expense ratio—the percentage of premiums spent on medical care—which rose to 88.9%, indicating that costs are growing faster than premiums. The news also weighed on shares of other health insurers facing similar cost pressures.
Elevance Health is up 6.5% since the beginning of the year, but at $377.39 per share, it is still trading 16.6% below its 52-week high of $452.69 from April 2025. Investors who bought $1,000 worth of Elevance Health’s shares 5 years ago would now be looking at an investment worth $1,120.
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