UPDATE: Sterne Agee Initiates Coverage on WellPoint with Neutral Rating, $130 PT on Positive Bias

In a report published Friday, Sterne Agee analyst Brian Wright initiated coverage on

with a Neutral rating and $130.00 price target. In the report, Sterne Agee noted, “WelllPoint shares trade at a discount to long-term sustainable earnings power and reserve growth in 1Q14 was particularly strong. We are Neutral on the stock due to near-term industry margin pressures in the commercial business, but believe over the long term that its valuation will improve. In a post Affordable Care Act world, we see sustainable net margins based on our estimated '15 business mix in the 3% range, which would yield $10-$12 per share in earnings if the company were to perform to potential. With the Amerigroup acquisition, WLP's fortunes are less tied to the commercial results that now contribute 54% of premiums, down from 80% in '08, which is particularly beneficial given margin pressures in the commercial business.” WellPoint closed on Thursday at $108.12.