On Wednesday, Bernstein SocGen Group initiated coverage on agilon health Inc (NYSE: NYSE:AGL) with a Market Perform rating and set a price target of $2.50.
The company, a leader in value-based care (VBC) with approximately 525,000 Medicare Advantage (MA) members, has seen significant enrollment growth, increasing nearly sixfold since 2019. Despite this expansion, agilon health's stock has declined roughly 80% year-to-date due to pressures on cash flow.
The analyst pointed out that the company's rapid growth has come at a cost, notably impacting cash flow. This financial strain has been exacerbated by recent reductions in the company's guidance. A primary concern for agilon health in the near term is the potential for further cash flow deterioration, which could be triggered by medical costs exceeding expectations. Such a scenario would highlight the risk of a capital raise to maintain operations.
To address these financial challenges, agilon health's management has implemented a series of actions aimed at improving the company's performance.
"AGL management is addressing this risk with a series of actions that should ultimately improve performance, but we think it is prudent to see tangible signs of the turnaround plan working before jumping onboard with AGL attractive LT story," analysts at Bernstein said.
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