Despite apprehensions around a surprising surge in Medicare procedures impacting profits, Wells Fargo sees a potential purchase window in managed care stocks. Last week, stocks took a dive following UnitedHealth’s (NYSE:UNH) announcement of an unexpected rise in Medicare Advantage procedures, attributed to pent-up pandemic demand. This statement was further reinforced by Humana (NYSE:HUM), another key Medicare Advantage provider, who echoed seeing similar upticks in demand.
Wells Fargo points out that this unforeseen rise might result in mispriced Medicare Advantage plans for 2023/2024, consequently squeezing profits. However, despite the negative short-term outlook, the firm emphasizes managed care stocks’ resilient history, citing an average 11.3% rebound in the following month when the S&P 500 MCO index has dropped below 90% of its 200-day moving average. So, while current overhangs persist, historically, buying dips in managed care has proven beneficial.
Indeed, a look at the overall Wall Street consensus of managed care stocks pictured above shows that analysts have Strong Buy ratings on almost all of them. Interestingly, though, analysts expect the most upside potential from Clover (NASDAQ:CLOV) at 67.37% despite having a Hold rating.
