Humana Receives Uncommon Stock Upgrade on Wall Street Despite Recent Challenges

Humana Inc (NYSE: HUM) received a significant upgrade from analysts at Bernstein on Tuesday, who raised their rating for the stock from Market-Perform to Outperform, even amid the company’s recent difficulties.

The analysts have expressed a more optimistic view on Humana’s future, attributing this shift to several factors that enhance its outlook. They believe that current risks have been adequately factored into market expectations and pricing, alongside an improved outlook for the sector and potential positive catalysts.

Bernstein noted improvements in Humana’s operating outlook for Medicare Advantage, which suggest that previous uncertainties related to STARS ratings and pricing execution are becoming clearer. They observed that the stock’s price reduction enhances the potential for upside relative to downside risks, including possible takeover interest and outsourcing of Pharmacy Benefit Management.

Despite this upgrade, Bernstein has adjusted its financial model after Humana announced a notable decline in STARS ratings. They anticipate a decrease in STARS ratings for 2026, projecting that about 25% of members will be in plans with four or more stars. Although this decline is expected to negatively impact earnings, the analysts believe that pricing adjustments and efforts to manage member migration could offset roughly two-thirds of the impact on the Medical Loss Ratio.

As a result of these adjustments, Bernstein has lowered its price target for Humana to $308 from a prior target of $405, and reduced their target multiple to 16.0x next-twelve-month EPS, down from 18.0x. This reflects a delay in earnings recovery associated with the STARS ratings situation.

Despite the challenges faced, the analysts’ upgrade reflects a cautiously optimistic perspective on Humana’s prospects moving forward.