What Happened?
Shares of health coverage company Centene (NYSE: CNC) fell 3% in the morning session after investor concerns continued to weigh on the stock following a significant financial challenge disclosed by the company's CEO last week.
The pressure on the shares stemmed from comments made by CEO Sarah London at the Deutsche Bank Healthcare Summit on September 11. London highlighted a '$2.4 billion risk adjustment headwind' facing the company's Marketplace business. This negative news overshadowed more positive updates, such as a reaffirmation of the company's full-year earnings per share forecast.
The ongoing investor apprehension is compounded by a negative shift in analyst sentiment. While some analysts reiterated positive ratings, others, including Barclays and JP Morgan, recently cut their price targets. Over the previous quarter, the average analyst price target for Centene decreased by nearly 35%, contributing to a cautious outlook.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Centene? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Centene’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 2.9% on the news that the company highlighted a significant challenge for its Marketplace business during a recent investor conference.
At the Deutsche Bank Healthcare Summit on September 11, CEO Sarah London discussed a "$2.4 billion risk adjustment headwind" facing the company's Marketplace segment, overshadowing positive updates in its Medicaid and Medicare businesses and a reaffirmation of its full-year EPS forecast.
Adding to investor concerns are broader industry pressures, with reports indicating that health insurance costs are set for their largest increase in years. Insurers point to potential tariffs on pharmaceutical imports and the high cost of new obesity treatments as key drivers of rising expenses.
While Truist Securities raised its price target for Centene on Friday, this positive note was tempered by recent price target cuts from several other firms, including Barclays and JP Morgan, contributing to a consensus "Hold" rating from analysts.
Centene is down 46.4% since the beginning of the year, and at $32.44 per share, it is trading 57.6% below its 52-week high of $76.57 from September 2024. Investors who bought $1,000 worth of Centene’s shares 5 years ago would now be looking at an investment worth $557.58.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
