Jefferies upgrades Humana stock rating to Buy on improved Stars diversification

Investing.com - Jefferies upgraded Humana (NYSE:HUM) from Hold to Buy on Friday, while raising its price target to $313.00 from $253.00. The new target represents significant upside from Humana’s current trading price of $253.02, aligning with InvestingPro analysis that suggests the healthcare provider is currently undervalued.

The upgrade follows Jefferies’ contract-level analysis of Humana’s Stars diversification efforts, which led the firm to increase its 2026 and 2027 earnings per share estimates to approximately $14.19 and $24.10, respectively, compared to consensus estimates of $12.37 and $19.47. This optimistic outlook builds on Humana’s solid financial foundation, with the company generating $126.36 billion in revenue over the last twelve months with 9.87% growth.

Jefferies noted that high voluntary churn of approximately 15% and significant 2026 share gains should drive even higher Stars diversification than previously anticipated by the market.

The firm’s new outlook incorporates assumptions that approximately 2.4 million gross new members will onboard at a negative 1% margin, while also increasing the headwind from value-based care contracting to 100 basis points from 30 basis points previously.

Despite these potential challenges, Jefferies now views Humana’s risk/reward profile as attractive, leading to the rating upgrade.

In other recent news, Humana Inc. reported third-quarter 2025 earnings that surpassed analyst expectations, with earnings per share (EPS) at $3.24, exceeding the forecasted $2.83. Revenue also exceeded projections, reaching $32.65 billion compared to the anticipated $32 billion. Despite the financial results beating forecasts, Humana’s stock experienced a decline, attributed to concerns over Medicare Advantage membership growth expectations for 2026. Analysts from Mizuho and Jefferies adjusted their price targets for Humana, with Mizuho lowering it to $310 and Jefferies to $253, both citing concerns related to Medicare Advantage. Additionally, CNSide Diagnostics, a subsidiary of Plus Therapeutics, Inc., signed a national agreement with Humana to provide coverage for its Cerebrospinal Fluid Tumor Cell Enumeration test. This agreement, effective October 29, 2025, will extend coverage to approximately 16 million people, bringing the total policy coverage for the test to 67 million. These developments highlight the ongoing adjustments and strategic decisions within Humana and its associated partnerships.

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