Wedbush Downgrades WellCare Health Plans (WCG) to Neutral

Wedbush downgraded WellCare Health Plans (NYSE: WCG) from Outperform to Neutral with a price target of $55.00 (from $70.00). Analyst Sarah James thinks a takeout is less likely.

"We no longer see WellCare as a near-term takeout candidate and we believe the current $62 price and our prior $70 price target both assume takeout likelihood; we are lowering our price target to $55, lowering estimates, and downgrading to NEUTRAL. Our new price target values WellCare on the fundamentals of its business rather than a takeout price per member + cash valuation. We are also lowering our 2015E to $4.07 from $4.78 and our 2016E to $5.18, reflecting what we see as a challenging multi-year turnaround."

"It’s not that it hired a CFO, but who it hired that gives us confidence WellCare is focused on a turnaround, not a sale. Drew Asher was CFO of Coventry during their successful turnaround; we believe he was brought onboard to turn around WellCare. Drew left a very promising position at Aetna for WellCare and we believe neither of these would have occurred if a sale was imminent," added the analyst. "The most likely buyers of WellCare have been very clear recently that they are not on the market for a Medicaid plan. We met with Humana Tuesday who commented they believed Caid multiples to be too high for M&A and ROIC on TANF/CHIP to be lower than existing organic growth opportunities. Aetna recently commented multiples were too high and the risk of losing GA too great."

For an analyst ratings summary and ratings history on WellCare Health Plans click here. For more ratings news on WellCare Health Plans click here.

Shares of WellCare Health Plans closed at $62.18 yesterday.

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