UPDATE: JP Morgan Initiates Neutral, $35 PT on Coventry on Medicaid Challenges

JP Morgan initiates its coverage on Coventry

with a Neutral rating and a price target of $35. JP Morgan comments, "Coventry has worked hard to diversify its business over the last several years including solid growth in its Medicaid business with revenues approaching $3 billion, ~20% of total. Although the company's Q1'12 experience in Kentucky highlights some of the growing pains that come with Medicaid expansion, we believe Coventry will find a way to work with the state and be profitable over time. Also cushioning investors is the significant cash position, and a proven management team, providing potential EPS upside from capital deployment. That said Coventry's lack of significant scale coupled with what appears to be fairly minimal commercial margin expansion opportunity leaves the company with more uncertainty than most heading into potential healthcare reform implementation." CVH closed at $32.70 on Tuesday.