On Tuesday, Stifel increased the price target for Alignment Healthcare Inc (NASDAQ: ALHC) to $14.00, up from $12.00, and reaffirmed its Buy rating on the stock. The adjustment comes after Alignment's primary health plan, which encompasses 86% of its members, was recognized as a 4-star or higher plan on the Centers for Medicare & Medicaid Services (CMS) website. Previously, the plan was listed as a 3-star or higher.
The stock has rebounded to levels near those seen before October 1, 2024, when the 2025 CMS star ratings were initially released. Despite this, the percentage of members in Alignment's California counties expected to be in a 4-star or higher plan in 2025 has dropped to 63% from 69% in 2024 and 79% in 2023.
Stifel's analysis indicates that Alignment Healthcare managed to achieve a 50% growth in members during 2024. The firm anticipates another robust year of membership expansion, projecting a 30% increase for 2025. This growth is expected as Alignment maintains its 4-star rating, while competitors may face challenges due to having to reduce benefits associated with lower average ratings.
The 4-star rating is significant as it not only reflects the quality of service provided by Alignment Healthcare but also influences the plan's visibility on the CMS platform. Higher-rated plans tend to be more attractive to potential members, which can drive enrollment and revenue growth for the healthcare provider.
In conclusion, the upgraded price target reflects the analyst's confidence in Alignment Healthcare's ability to sustain its growth trajectory through maintaining high service quality, as evidenced by the CMS star rating system.
In other recent news, Alignment Healthcare has undergone significant changes to its board structure alongside impressive financial growth. The company reported a 47% surge in revenue and a 56% increase in health plan membership in the second quarter. This performance prompted Baird, TD Cowen, and Piper Sandler to increase their stock price targets for the company.
Furthermore, Alignment Healthcare announced the immediate resignations of board members Thomas Carella and Jeffrey Margolis. Their departures were not due to any disagreements regarding company operations, policies, or practices. Margolis has since entered into a consulting agreement with Alignment Healthcare's primary operating subsidiary, effective until June 30, 2026.
These recent developments have led to an upward adjustment in year-end membership expectations by 8,000 members and a forecast of at least 20% growth in 2025. Despite the positive outlook, Alignment Healthcare has no plans to enter new states in 2025, focusing instead on profitability and expanding its national footprint.
InvestingPro Insights
Alignment Healthcare's recent performance aligns with Stifel's optimistic outlook. InvestingPro data reveals that ALHC has experienced significant growth, with revenue increasing by 37.46% over the last twelve months as of Q2 2024, reaching $2.23 billion. This robust growth is further emphasized by a 47.34% quarterly revenue increase in Q2 2024.
The company's stock has shown remarkable momentum, with InvestingPro data indicating a 126.04% price return over the past six months. This surge has brought ALHC's stock price to 96.93% of its 52-week high, trading near $10.85 as of the previous close.
However, investors should note that despite strong top-line growth, ALHC is not yet profitable, with an adjusted operating income of -$128.54 million over the last twelve months. This aligns with an InvestingPro Tip suggesting that analysts do not anticipate the company to be profitable this year.
For those seeking a deeper understanding of Alignment Healthcare's financial position, InvestingPro offers 11 additional tips, providing a comprehensive view of the company's prospects and challenges in the evolving healthcare landscape.
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