In a report published Friday, Sterne Agee analyst Brian Wright initiated coverage on Molina Healthcare (NYSE: MOH) with a Buy rating and $69.00 price target.
In the report, Sterne Agee noted, “We believe MOH shares do not fully reflect normalized earnings power and investors receive post '15 top-line growth for free. Molina shares are currently valued at just 7.0x a 2% net margin derived EPS based on '15 premiums.
"We believe the discount is a function of two factors: 1) concern about Sovaldi and other high-cost specialty pharmaceuticals treating Hepatitis-C coming to market late in '14 and 2) anchoring to recent trough net margin levels with investors less willing to contemplate cash earnings guidance. On a cash earnings basis, MOH shares are currently valued at just 12.0x '14 guidance (including $0.48 per share in stock-based compensation).”
Molina Healthcare closed on Thursday at $44.53.
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