Insurance Adjustment: Molina Healthcare Downgraded By JPMorgan On Valuation

Shares of Molina Healthcare, Inc. (NYSE: MOH) are now fairly valued after eclipsing the $90 level, according to JPMorgan.

The Analyst

JPMorgan's Gary Taylor downgraded Molina from Overweight to Neutral with a price target lifted from $91 to $106.

The Thesis

Molina is a "pure play" stock for investors looking for exposure to low-income health insurance companies, Taylor said in the downgrade note.

While it remains well-positioned to benefit from Medicaid programs and subsidized coverage offered through federal and state health care exchanges, the bullish case for the stock can no longer be made after trading above the analyst's $91 price target, he said. 

Molina's stock is now trading at a more fair valuation of 15 times Taylor's 2020 earnings per share estimate on a fully normalized pretax margin, the analyst said. The valuation implies the company will see a complete recovery in margins and fall in line with its peers, he said. 

Any incremental upside beyond the analyst's price target would have to come from a "much higher view" of sustainable margins than Medicaid plans have ever achieved or from new revenue opportunities, Taylor said. 

Price Action

Molina shares were trading down 1.24 percent at $98.17 at the time of publication Wednesday.

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