Bernstein lowers Elevance stock price target to $445 on ACA, Medicaid pressure

Elevance (ELV) reported Q2 2025 adjusted EPS of $8.84, falling short of consensus expectations by $0.14 according to UBS, prompting a significant cut to its full-year 2025 earnings guidance to $30.00 per share. While revenue of $49.8 billion exceeded consensus, results were bolstered by approximately $1.20 per share from one-time items, as challenges in ACA and Medicaid segments led to extended recovery timelines into 2027-2028. Consequently, multiple firms including Bernstein, UBS, TD Cowen, Guggenheim, and Leerink Partners have lowered their price targets, with Leerink downgrading to Market Perform, though some analysts maintain a positive outlook citing ELV's attractive valuation and long-term growth potential despite the near-term pressures.

Analysis

Elevance Health's (ELV) second-quarter 2025 results reveal a company facing significant operational headwinds despite a revenue beat. The firm reported revenue of $49.8 billion, a 10.2% year-over-year increase that surpassed consensus estimates by 2.8%, driven by pharmacy revenues and higher premiums. However, the reported adjusted earnings per share of $8.84, described as both in-line with consensus by Bernstein and a $0.14 miss by UBS, was materially supported by non-recurring items. Guggenheim noted the quarter included a $209 million value-based care settlement, contributing approximately $0.70 per share, and a one-time tax benefit of around $0.50 per share. The most critical development is the company's downward revision of its full-year 2025 earnings guidance to $30.00 per share, a substantial reduction reflecting persistent challenges. Analysts pinpoint elongated recovery timelines in the Affordable Care Act (ACA) and Medicaid segments, where membership was lower than expected, as the primary drivers of weakness, with a full recovery not anticipated until 2027-2028. This outlook prompted a series of price target cuts from firms including Bernstein (to $445), UBS (to $435), and TD Cowen (to $330), as well as a downgrade to Market Perform from Leerink Partners. Despite these near-term pressures, some analysts maintain a constructive long-term view, citing the stock's valuation near its 52-week low, an attractive P/E ratio of 11.85x, and a projected 60% EPS growth over the next four years.

Key Decisions for Investors

• Investors should scrutinize the underlying earnings quality, as Q2 EPS was inflated by approximately $1.20 from one-time items, and the significant cut to full-year 2025 guidance signals material operational challenges.
• Monitor developments in the Medicaid and ACA segments closely, as analysts project delayed recoveries extending to 2027-2028, making these the primary risk factors for medium-term performance.
• Acknowledge the divergence between the bearish near-term outlook, reflected in multiple price target cuts and a ratings downgrade, and the bullish long-term case based on an attractive valuation and projected growth.
• Consider the current valuation near a 52-week low as a potential entry point for a long-term, value-oriented strategy, but weigh this against the clear execution risks and downgraded near-term growth trajectory.