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Senior health care company agilon health can surge more than 60% on its compelling business model, according to Goldman Sachs. Analyst Jamie Perse initiated coverage of agilon health with a buy rating, saying that the company will benefit from a fast-growing Medicare Advantage market. The population of more than 27 million members in the program is expected to grow to 37 million by 2026, according to the note. “We believe the size of the market, tailwinds to MA patient growth, incentives from CMS/payors, and the micro challenges facing PCPs will support significant opportunity for growth over the next 5 years,” Perse wrote in a Monday note. The company’s focus on small to mid-sized cities/regions for growth, its scalable business model requiring minimal capital expenditures, and a robust pipeline of contracts already in place should boost the stock, the analyst wrote. “Over the next 12 months we expect positive catalysts from (1) better than expected quarterly performance on medical margin and operating leverage, (2) growth from the new CMS ACO Reach program, beginning next year, where we see long term targets as having significant upside potential, (3) the announcement of the class of 2024 early next year which we believe could be larger than expected,” read the note. Agilon health has outperformed the broader market this year. It’s down just 13% in 2022, compared to the 14.7% decline in the S & P 500. The firm’s 12-month target price of $38 implies 61.8% upside from Friday’s closing price of $23.48. The stock climbed 0.5% in Monday premarket trading. —CNBC’s Michael Bloom contributed to this report.
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