What Happened?
Shares of healthcare insurance company Molina Healthcare (NYSE:MOH) fell 3.8% in the afternoon session after TD Cowen lowered its price target on the stock to $283 from $369, citing elevated medical costs.
The new price target came after Molina pre-announced its second-quarter 2025 earnings, which showed that higher-than-expected medical utilization is affecting all three of its business lines and is expected to persist for the rest of the year. As a result, TD Cowen reduced its full-year 2025 earnings per share (EPS) forecast for Molina to $21.68 from $24.45. A key metric of concern is the medical loss ratio (MLR), which is the percentage of premiums an insurer spends on healthcare claims. A higher MLR indicates lower profitability. TD Cowen raised its estimate for Molina's consolidated MLR to 89.5%. Other analyst firms, including UBS and Barclays, also recently lowered their price targets on Molina due to the ongoing cost pressures.
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What Is The Market Telling Us
Molina Healthcare’s shares are quite volatile and have had 18 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 8.1% as several negative developments weighed on the sector. Weakness in managed care providers was a significant factor, with companies like Elevance Health and Humana seeing declines due to an analyst downgrade and a lost lawsuit regarding Medicare bonus payments, respectively. Additionally, some pharmaceutical and biotech companies experienced sharp drops following unfavorable news; for instance, Sarepta Therapeutics plunged after a report indicated another patient death tied to its experimental gene therapy, and GSK's blood cancer drug dosage was voted against by the FDA advisory committee. Broader market sentiment, including concerns about rising costs and inadequate pricing for 2025 plans among health insurers, also contributed to the downward pressure on healthcare equities.
Molina Healthcare is down 38.4% since the beginning of the year, and at $176.91 per share, it is trading 51% below its 52-week high of $360.77 from September 2024. Investors who bought $1,000 worth of Molina Healthcare’s shares 5 years ago would now be looking at an investment worth $974.68.
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