Double Upgrade For Molina Healthcare On Removal Of CEO

Molina Healthcare, Inc.MOHZack SopcakMolina Healthcare's stock rating from Underweight all the way to Overweight with a price target boosted from $65 to $68.

Shares of Molina Healthcare have gained more than 20 percent since the company parted ways with its CEO and chief financial officer in May of 2017, Sopcak noted. The management shuffle is viewed as a "much needed overhaul" for the "less efficient" player in the Medicaid space (see Sopcak's track record here).

However, Molina Healthcare's stock has given back a lot of its gains since early June but this isn't necessarily justified since the company communicated a clear cost cutting plan and strategy, Sopcak continued. Specifically, management detailed a path toward $200 million in savings by the end of the year and $300 to $400 million by the end of 2018, mostly due to staffing reductions, exiting non-strategic ACA-marketplace regions and implementing tighter physician networks and contracts.

Perhaps more important to Molina Healthcare's stock, the company's strategy moving forward also limits downside. In fact, even if the company doesn't fully meet its financial targets its strategy will at the very least result in a "more-right sized structure" compared to its peers.

Finally, the likelihood of a new CEO announcement before the end of the year will be seen as a positive catalyst for the stock and the first step toward delivering on the restructuring targets.

At time of publication, shares of Molina were up 5.04 percent at $59.64.

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