UPDATE: Bank of America Upgrades Magellan Health Services; Raises PO
According to a research report published this morning, Bank of America has upgraded Magellan Health Services (NASDAQ: MGLN) from Underperform to Buy, and raised PO from $44 to $52.
In the report, Bank of America explained, "We are upgrading shares to Buy (from Underperform) and raising our P.O. to $52 (from $44) with a call that MGLN will retain its largest commercial behavioral health customer near term. The BCBS plan has not bid out the book, which comes up for renewal at year end 2012, and taking benefits in house would require longer lead times. This contract accounts for 5% of total revenue, but potentially ~15% of segment profit. MGLN will concede margin, but locking in terms limits contract termination risks ahead of some growth opportunities. Net, high FCF yields compensated for attrition historically, but a 10% FCF yield + 18% current market cap in cash more clearly reflects a discount to fair value today."
Magellan Health Services is currently trading at $43.60.
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