Humana: Shares Attractive as Medicare Advantage Prospects Likely to Improve in 2025 and Beyond

Humana shares are trading well below our $473 fair value estimate after concerns about the company's Medicare Advantage stronghold emerged in recent months. We still view Humana as a top-tier managed care organization with a narrow economic moat built on cost advantages and network effects primarily in its MA-focused operations. Despite near-term challenges in this market that have pushed down its 2024 profit outlook, we still view the MA end market as attractive for MCOs in the long run, and Humana looks likely to pull several levers to gradually improve its MA profitability, starting in 2025.