Things have gone from bad to worse for Centene (NYSE:CNC), which has seen its prospects drop precipitously over the past few weeks.
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The tough spell was jumpstarted earlier this month when the company pulled its 2025 guidance on July 1st, citing slower growth rates and higher costs.
The reaction from the market was as swift as it was expected – CNC’s share price took a nosedive, losing some 40% of its value in one day. Last week’s earnings call provided further confirmation of the company’s rough stretch, with an EPS of -$0.16 missing by -$0.39.
However, top investor James Foord thinks a turnaround could be on the horizon.
“I believe Q2 is as bad as it gets, and based on some conservative estimates, Centene could double from here,” predicts the 5-star investor, who is among the top 2% of TipRanks’ stock pros.
For one thing, the Q2 results – while “ugly” – were better than some had been fearing. Moreover, the company’s cash flow remained a positive $1.8 billion, the company’s Prescription Drug Plan membership numbers remained stable and the segment’s $700 million in pretax earnings was better-than-expected, and Medicare Advantage is looking to breakeven by 2027 – a development that Foord terms “a silver lining.”
The falling share price has now made CNC’s valuation “high attractive” notes the investor, who points out that its Price-to-Earnings multiple of less than 7x is significantly less than the 23x multiple that Centene has been trading at over the past 5 years.
“As the situation normalizes, I believe we should see the P/E expand towards these levels. At a modest 15 P/E on $4 EPS, that’s a $60 price target by 2027,” adds Foord.
The investor acknowledges risks to his bullish thesis, such as Medicaid costs continuing to deteriorate and the high cost of drugs.
Still, Foord is not deterred, spotting an opportunity for long-term investors.
“With the worst news priced in, CNC is a compelling deep value contrarian play,” sums up Foord, who is rating CNC a Strong Buy. (To watch Foord’s track record, click here)
That’s significantly more upbeat than the view on Wall Street. With 12 Holds far outpacing 3 Buys and 1 Sell, CNC has a consensus Hold (i.e. Neutral) rating. However, its 12-month average price target of $36.86 has an upside approaching 40%, indicating a decent amount of optimism regarding CNC’s ability to recover some of its lost ground. (See CNC stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.