Jefferies Upgrades Magellan, Says 'Path To 20% EPS Growth Improving'
In a report published Wednesday, analysts at Jefferies upgraded Magellan Health Inc (NASDAQ: MGLN) from Buy to Hold. The price target was raised from $64.00 to $78.00. According to the analysts, the 14 percent decline in the share price offers an attractive entry point for investors.
The visibility into the company's revenue is also improving. The analysts expect Magellan Health to be able to post about 20 percent top and bottom line CAGR during 2014-2018.
"M&A was part of MGLN's strategy to build a more comprehensive PBM offering. The company has effectively integrated two deals and just closed on a third. This has rounded out its PBM and led to strong organic growth in a challenging industry," the analysts stated.
In addition, the company's MCC division has witnessed early success in its serious mental illness program in Florida. Jefferies expects Magellan Health to be able to replicate this success in other states as well.
While the company reported weak 1Q15 results, the analysts believe that this did not warrant a 14 percent decline in the share price. "We believe the market over-reacted to mgmt.'s comments about the competitive nature of the IA RFP (not new news). This has helped de-risk a potential loss, while leaving upside should MGLN win," Jefferies said.
The analysts expect the company to be able to beat its revenue guidance of $2.5 billion for 2018.
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