It’s time to buy Humana , which could be the top retail Medicare Advantage prescription drug plan, according to Morgan Stanley. Analyst Michael Ha upgraded the stock to overweight from equal weight, saying Humana’s improved competitive position will drive earnings growth for the company. “At Humana’s Investor Day (9/15), the company unveiled a path to +48% cumulative earnings power over the next three years ($37 EPS by 2025) vs. +39% peer avg (UNH/ELV/CI/CVS) and a first look at 2023 plan value,” Ha wrote in a Tuesday note. “Based on our proprietary analysis of Medicare Advantage (MA) benefit richness, we believe Humana’s 2023 plan value increases are not only the highest in recent history but also positions the company as the #1 Ranked Retail Medicare Advantage prescription drug (MA-PD) plan in benefit richness amongst peers (vs. #5 ranking in the previous four years),” Ha added. Shares of Humana outperformed the broader market this year, up 8%, but the analyst expects that the health insurance company’s improved offerings will drive membership growth next year. “We now believe 2023 is more than just a one-year MA pricing reset but a structural enhancement to Humana’s MA benefit offering creating a value proposition that we believe should provide stronger membership growth in the coming years (more than double Individual MA membership growth to +10% yty 2023E from +4% yty 2022E) and a clearer path to $37 EPS by 2025,” Ha wrote. The analyst raised his price target on Humana to $549, up from $494, implying that shares can advance roughly 9.6% from Monday’s closing price of $501.07. The stock was up 1.2% midday Tuesday. — CNBC’s Michael Bloom contributed to this report.
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