On Friday, Needham began coverage on Evolent Health (NYSE:EVH) with a favorable outlook, assigning the stock a Buy rating and setting a price target of $16.00.
The firm's analysts highlighted Evolent Health's position as a prominent facilitator of value-based care, offering essential solutions that enable payors and providers to excel in both primary and specialty care sectors.
Despite a significant drop in Evolent Health's stock price following the company's third-quarter earnings report, Needham analysts are optimistic about the company's potential for recovery.
The challenges that led to the sell-off are seen as not unique to Evolent Health but rather common within the industry. The analysts are confident in the company's strategic actions to address these issues.
The next significant update from the company is anticipated to come during the JPM Conference. Needham expects Evolent Health to provide positive updates regarding negotiations with payors and utilization rates, which may act as a positive catalyst for the stock.
The current share price, trading at approximately 8.6 times the forecasted FY25 EBITDA, is considered by Needham to deeply undervalue the company. Their $16 price target is based on an estimated 10 times FY25 EBITDA, while their analysis suggests that the valuation could potentially rise to more than 11.5 times EBITDA.
Evolent Health's strategic measures to counteract the headwinds faced after the third-quarter earnings are seen as a step in the right direction. Needham's analysts recommend buying the stock at the current levels, viewing it as an undervalued investment opportunity.
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