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Humana still attractive acquisition target, but priced too high

Financial analysts say current share price may need to come down

As Humana continues to court potential buyers interested in its Medicare Advantage business, financial analysts remain divided on how much the company is worth.

Humana stock closed at nearly $215 a share on Friday amid speculation that Aetna, Anthem or Cigna may be interested in acquiring the Louisville, Kentucky-based insurer, FierceHealthPayer previously reported. That puts Humana's value at $32 billion, compared to $37 billion for Cigna and $41 billion for Aetna, according to The Street. Meanwhile, Anthem is worth about $44 billion, the Indianapolis Business Journal reported.

Some analysts remain bullish on Humana. The brokerage Cantor Fitzgerald, for example, lifted its price target for Humana stock to $230 a share, based on its revaluation, its Medicare Advantage focus and ongoing merger interest, Benzinga reported.

Others remain less optimistic. The investment group Susquehanna told Barron's that the current Humana share price is "not justifiable," adding that Humana shares have been supported largely "by projecting the notion that significant M&A was at hand."

The firm Sterne Agee CRT agreed, setting its price target for Humana at $150 per share and telling The Street, "The market needs a deal to justify the current valuation."

Humana has been rumored to be an acquisition target since March, FierceHealthPayer previously reported, and both Aetna and Anthem appear ready to buy. Humana has about 3.2 million Medicare Advantage members, compared to 1.2 million for Aetna and 1.4 million for Anthem, Barron's pointed out.

Buying Humana would boost 2017 earnings for either Aetna or Anthem by close to 10 percent, according to Benzinga. Meanwhile, Cigna's earnings would only rise about 1 percent in 2017 following a Humana acquisition, the article said.

Of the potential buyers, Anthem seems to be in the best position, the Indianapolis Business Journal reported. The insurer could best afford to pay $230 a share for Humana--nearly $35 billion--and still boost its profits thanks to its success in selling plans on the Affordable Care Act exchanges, according to the article.

For more:
- here's The Street article
- read the Indianapolis Business Journal post
- check out the Benzinga article
- see the Barron's post

Related Articles:
Humana receives interest from potential buyers, may sell
Anthem may be ready to make an acquisition
Aetna poised to make an offer for Cigna, Humana
Booming Medicare business could make Humana an acquisition target