UPDATE: Bank of America Upgrades Aetna on Lower Risks, Higher Visibility
In a report published Friday, Bank of America analyst Kevin Fischbeck upgraded the rating on Aetna (NYSE: AET) from Neutral to Buy, and raised the price target from $68.00 to $79.00.
In the report, Bank of America noted, “AET's initial exchange strategy was to target participation in 14 states but the company has since withdrawn from several (CT, GA, MD, NY and NV) and will participate on a much more limited basis in 2014. Meanwhile, in states where it is participating, our analysis indicates its pricing appears relatively conservative. As a result, AET's strategy reduces the potential variability in 2014 earnings from a mispricing/adverse selection issue. At the same time, we believe that the risk of small group employers dumping their employees onto the exchange is lower than we initially feared as confusion around how and when Reform requirements will take place is causing most small employers to take a wait-and-see approach towards potentially dumping their employees onto the Exchanges. Individual and small group represents 16% of AET's revenue (only 9% of EBITDA), and the company's actions mean that results would have to be materially worse than expected where they are participating in order for exchanges to be disruptive.”
Aetna closed on Thursday at $65.70.
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