Aetna A Top Trump Pick At Credit Suisse

Credit Suisse has upgraded Aetna Inc AET to Outperform from Neutral, saying that the outlook for Aetna shares is now increasingly brighter under a Trump presidency.

“Aetna has centered its future growth strategy around Medicare Advantage, and this program has always garnered exceptionally strong support among Republicans,” analyst Scott Fidel wrote in a note.

Aetna, Medicare Advantage And A Republican Government

Fidel pointed out that Aetna has over 90 percent of its members in four-star+ MA plans, which is the highest among public MCOs. Aetna’s MA membership growth of about 8 percent year-to-date also exceeds the 5 percent membership growth for the overall industry.

Importantly, the analyst believes a Trump presidency and Republican-controlled Congress could repeal several of the “onerous insurance market reforms” of the Affordable Care Act ("Obamacare") that have hurt margins in Aetna’s once solidly profitable Commercial small  group and individual businesses.

Benefits Of A Repealed ACA

“Aetna could also benefit significantly from a permanent repeal of the ACA health insurance fee, which has been dilutive to earnings,” Fidel noted. 

Moreover, Aetna has increased chances of approval to its pending merger with Humana Inc HUM under Trump administration. Fidel raised his probability of deal closing to 30–40 percent from earlier view of 20–30 percent.

That said, Aetna should pay a $1 billion break-up fee to Humana if the deal is blocked by the courts in the upcoming December trial.

Fidel also raised his target price on Aetna shares to $135 from $120.

Shares of Aetna closed Thursday’s trading at $119.90.

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Posted In: Analyst ColorLong IdeasUpgradesHealth CarePrice TargetPoliticsAnalyst RatingsTrading IdeasGeneralCredit SuisseMedicare AdvantageScott Fidel
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