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Barclays Says Centene Shares Have Corrected 'Too Far and Too Long'

Barclays upgraded Centene Corp CNC to Overweight from Equal-weight citing that the stock has corrected too far and too long. The brokerage also lifted its price objective to $82.00 from $76.00 on the shares. The stock traded 2.91 percent higher on Monday.

The analyst remained quiet for nearly a year and remained significantly cautious on the impact of the Health Net transaction. The brokerage also boosted its estimations for EPS, as well as revenues. Raskin reminded that the earlier downgrade came a day after the Health Net Transaction was disclosed since he felt the transaction to be dilutive to value. The analyst reiterated his stand on the transaction.

In a note to clients, Barclays said, "Today, we think that the combined entity is worth $82 (and we are a year progressed) suggesting that we are still resistant to the idea of value creation. That said, we believe shares of CNC have simply corrected too far and for too long, and now represent a very attractive investment."

The brokerage pointed out five factors for the rationale behind in upgrading the stock and boosting the price target. The first is that the analyst believes it's a growth company; the second is the valuation presently more than reflected the changes in Centene's growth rates with Health Net.

The third factor is the analyst believes the returns should be looked at to determine valuation multiples; the fourth factor is that the risk of Health Net setback witnessing a decline every month. On a combined basis, the brokerage believes the management has improved.

DateFirmActionFromTo
Jun 2016BarclaysUpgradesEqual-weightOverweight
Jun 2016BernsteinInitiates Coverage onMarket Perform
May 2016Stifel NicolausUpgradesHoldBuy

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