On Friday, agilon health Inc (NYSE:AGL) experienced a change in stock rating as William Blair downgraded the company from Outperform to Market Perform. The adjustment comes after agilon health reported third-quarter results on Thursday, November 7, which met sales expectations but fell short concerning adjusted EBITDA.
The company also revised its profit expectations for 2024 downward, citing negative prior-period developments and rising costs for the current year. This pattern echoes challenges faced across the Medicare Advantage (MA) and MA value-based care (VBC) sectors.
William Blair's decision to lower the rating reflects a cautious outlook for agilon health's stock, anticipating subdued investor interest in the short term. This sentiment is attributed to the high medical costs that are expected to be temporary and the current uncertainty surrounding the company's recovery prospects.
Despite the recent downturn in agilon health's stock, William Blair suggests that there may be more promising investment opportunities within the sector. They highlight companies with less direct exposure to Medicare Advantage risk as potentially more attractive options for investors.
In other recent news, agilon health has been subject to several downgrades from major financial firms. Citi has downgraded agilon health from Neutral to Sell, slashing its price target from $7.00 to $2.50 due to concerns regarding the company's ability to manage Medicare Advantage costs and renegotiate contracts for 2025.
BofA Securities also downgraded the company's stock from a 'Buy' rating to 'Underperform', reducing the price target to $3.00. Similarly, Deutsche Bank (ETR:DBKGn) adjusted agilon health's price target to $4.00, maintaining a Hold rating on the stock.
These downgrades follow agilon health's recent earnings report, which revealed a mixed performance. The company reported a 38% increase in total revenue, reaching $1.48 billion, but fell short of the consensus estimate of $1.56 billion. Despite the revenue shortfall, the company's Medicare Advantage membership saw significant growth of 38% year-over-year, reaching 513,000 members.
However, agilon health's full-year revenue guidance has been revised downwards due to retroactive contract terminations. Despite these challenges, agilon health reported better-than-expected adjusted EBITDA figures, with a loss of $2.8 million compared to the anticipated $7.9 million loss forecasted by analysts. These recent developments highlight the ongoing challenges faced by agilon health in the Medicare Advantage sector.
InvestingPro Insights
Recent data from InvestingPro paints a challenging picture for agilon health Inc (NYSE:AGL), aligning with William Blair's downgrade. The company's financial metrics reveal significant headwinds, with InvestingPro Tips indicating that AGL is not profitable over the last twelve months and analysts do not anticipate profitability this year. This corroborates the concerns raised about the company's revised profit expectations for 2024.
The stock's performance has been particularly weak, with InvestingPro data showing a staggering 78.07% price decline over the past year. This dramatic fall supports William Blair's expectation of subdued investor interest in the short term. Additionally, AGL's gross profit margin stands at a mere 0.93%, underscoring the "InvestingPro Tip" that the company suffers from weak gross profit margins.
Despite these challenges, it's worth noting that AGL holds more cash than debt on its balance sheet, which could provide some financial flexibility as it navigates through this difficult period. For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into AGL's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.