Oppenheimer Boosts Hospital Price Targets Following Obamacare Decision

Following the Supreme Court's decision on Thursday to reaffirm the Affordable Care Act, also known as Obamacare, analysts at Oppenheimer increased their price target on HCA Holdings Inc HCA and Community Health Systems CYH.

Oppenheimer's Michael Wiederhorn hiked Community Health's price target by 33 percent, from $60 to $82, and HCA's price target by 17 percent, from $87 to $102. Community Health closed Thursday at $62.40; HCA closed at $90.75.

Both HCA and Community Health have outperformed the market year-to-date, gaining 24 and 16 percent, respectively. However, Wiederhorn said that "the stocks reflected a discount well beyond the risk/reward of the ruling, and we see the group returning to historical valuations."

Oppenheimer said the group trades at 8x 2016 EBITDA should trade at 8.5x historically.

The "ACA opportunity remains significant," Oppenheimer added. The analysts argued that the Medicaid expansion may be "a more compelling option" for states, notably Florida and Texas, two key states for public hospitals.

Most importantly, Oppenheimer said that the Supreme Court ruling will remove "the overhang" and uncertainty surrounding the hospitals. That, they said, is "critical for investor earnings visibility."

Oppenheimer's analysis at least mirrors the initial market reaction. Within the past five days, Community Health gained 12.7 percent, while HCA gained 9.5 percent. In early Friday trading, Community Health added another 0.5 percent. HCA was higher by another 1 percent.