UPDATE: Goldman Sachs Upgrades Health Net

According to a research report published this morning, Goldman Sachs has upgraded Health Net

from Neutral to Buy. Goldman Sachs commented in the report, "Asset value provides a floor and potential upside: 1Q revealed a sharply lower earnings level driven by a negative commercial price-to-cost trend spread that reflects a tougher margin environment (directionally consistent with our sector view though significantly more severe in the case of HNT). However, looking beyond lower earnings, underlying asset value suggests to us potential upside. We derive an ‘M&A value' for HNT at $50 (vs. prior $67) based on applying valuation per member from historical deal comps to enrollment (with a 30%/20% discount to commercial/Medicaid to reflect HNT market/company circumstances) with TRICARE at 10x $50m after-tax earnings, less ~$300 mn net debt." Goldman Sachs maintained its $35 PT on Health Net, which closed yesterday at $27.26.