On Wednesday, Piper Sandler affirmed a positive stance on Evolent Health (NYSE:NYSE:EVH), maintaining an Overweight rating and a $51.00 price target for the company's stock. The endorsement comes after a thorough examination of Evolent Health's business prospects, including recent wins and the timeline for new launches in the first half of 2024.
Evolent Health announced two significant contracts at a conference on January 9, 2024. The first is believed to be with Neighborhood Health Plan of Rhode Island, which is expected to implement Evolent's NIA Tech & Services Suite in the 2024 calendar year, covering over 220,000 lives across various plans.
The deployment, initially scheduled for April 1, 2024, is now set for June 1, 2024. This expansion is projected to generate an additional $0.60 per member per month (PMPM) and could contribute approximately $1.6 million in annual revenue at full run-rate.
The second contract, with an unidentified new customer in the Southwest, involves a 100,000 member Commercial and Medicare Advantage plan. The comprehensive Tech & Services deal, which includes oncology and advanced care planning, could yield $1.80 PMPM and add around $2.2 million in annual revenue at full run-rate.
During the fourth quarter 2023 earnings call on February 22, 2024, Evolent Health revealed two additional wins. The company's first Advanced Imaging Performance Suite customer is believed to be CareSource, a multi-state plan with over 2.3 million lives across Medicaid, Commercial, and Medicare. This deal is estimated to bring in $3.00 PMPM, translating to a significant $82.80 million in annual revenue at run-rate.
Another expansion for radiation and surgical oncology Tech & Services with CNC is expected to cover 1.1 million Medicare Advantage lives, contributing $8.8 million in annual revenue at run-rate.
However, the launch of Evolent Health's MOH FL Performance Suite contracts occurred on April 1, 2024, rather than within the first quarter of 2024 as initially anticipated. Medicaid redeterminations are forecasted to present a quarterly adjusted EBITDA headwind, starting at a ($2 million) impact.
The company's outlook remains conservative, with adjusted EBITDA estimates at the lower end of the first quarter 2024 guidance ranges.
Piper Sandler's analysis suggests a path to $260.4 million in adjusted EBITDA for the 2024 calendar year, compared to the company's midpoint guidance of $250.0 million. This estimate takes into account the delayed MOH FL launch and the anticipated impact of Medicaid redeterminations throughout the year, yet finds support for the higher adjusted EBITDA figure.
InvestingPro Insights
Evolent Health's recent announcements of new contracts and expansions have garnered positive attention, and Piper Sandler's continued Overweight rating reflects optimism about the company's trajectory. In line with this sentiment, InvestingPro Tips highlight that analysts predict Evolent Health will be profitable this year, which aligns with the company's significant contract wins that are expected to bolster revenue. Moreover, the company's stock price movements have been quite volatile, a factor that investors should consider when evaluating the timing of their investment decisions.
From a financial standpoint, InvestingPro Data reveals that Evolent Health has a market capitalization of $3.39 billion and has experienced a robust revenue growth of 45.26% in the last twelve months as of Q4 2023. This growth is particularly noteworthy as it underscores the company's expanding market presence and the potential for increased profitability mentioned in the InvestingPro Tips. Despite not paying dividends, the company has had a strong return over the last five years, suggesting that it could be a valuable addition to growth-focused portfolios.
To further understand Evolent Health's financial health and future prospects, investors can explore additional InvestingPro Tips by visiting https://www.investing.com/pro/EVH. There are 6 more tips available, offering deeper insights into the company's performance and valuation. Additionally, investors can use the coupon code PRONEWS24 to receive an extra 10% off a yearly or biyearly Pro and Pro+ subscription to InvestingPro, where they can access comprehensive analysis and data to inform their investment decisions.
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