TriNet Earnings: Challenging Period as Healthcare Utilization Normalizes Ahead of Pricing Resets

We maintain our $145 fair value estimate for narrow-moat TriNet following a difficult quarter as higher insurance costs weighed on profitability. Shares fell a sharp 16% after release as adjusted earnings per share of $2.16 came in within guidance but was 10% below consensus estimates. We believe the market has overreacted to these headwinds as TriNet will work to pass on higher insurance costs through regular quarterly customer repricing. Further, while health insurance utilization is up significantly from pandemic-era lows, our valuation model already factors in a more normalized insurance cost ratio of 89% from 2025 onward. At current prices, relative to our unchanged valuation, TriNet shares screen as attractive on a risk-adjusted basis.