What Happened?
A number of healthcare stocks fell in the afternoon session after several negative developments weighed on the sector. Weakness in managed care providers was a significant factor, with companies like Elevance Health and Humana seeing declines due to an analyst downgrade and a lost lawsuit regarding Medicare bonus payments, respectively.
Additionally, some pharmaceutical and biotech companies experienced sharp drops following unfavorable news; for instance, Sarepta Therapeutics plunged after a report indicated another patient death tied to its experimental gene therapy, and GSK's blood cancer drug dosage was voted against by the FDA advisory committee. Broader market sentiment, including concerns about rising costs and inadequate pricing for 2025 plans among health insurers, also contributed to the downward pressure on healthcare equities.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Medical Devices & Supplies - Imaging, Diagnostics company QuidelOrtho (NASDAQ:QDEL) fell 4%. Is now the time to buy QuidelOrtho? Access our full analysis report here, it’s free.
- Hospital Chains company Acadia Healthcare (NASDAQ:ACHC) fell 3.4%. Is now the time to buy Acadia Healthcare? Access our full analysis report here, it’s free.
- Health Insurance Providers company Elevance Health (NYSE:ELV) fell 7.2%. Is now the time to buy Elevance Health? Access our full analysis report here, it’s free.
- Health Insurance Providers company Molina Healthcare (NYSE:MOH) fell 8.1%. Is now the time to buy Molina Healthcare? Access our full analysis report here, it’s free.
- Health Insurance Providers company Alignment Healthcare (NASDAQ:ALHC) fell 4.9%. Is now the time to buy Alignment Healthcare? Access our full analysis report here, it’s free.
Zooming In On Molina Healthcare (MOH)
Molina Healthcare’s shares are quite volatile and have had 17 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 16 days ago when the stock dropped 20.8% after a sector-wide sell-off as competitor Centene Corp pulled its full-year financial guidance. The sharp decline in Molina's shares appeared to be a reaction to troubles at fellow health insurer Centene, which saw its stock plummet after withdrawing its financial outlook. Centene cited that market growth was "lower than expected" and the number of people making claims was much higher than forecast.
This news sparked fears among investors that the entire health insurance sector could be facing similar headwinds of rising costs and challenging market conditions. The negative sentiment quickly spread, impacting peers like Molina, UnitedHealth Group, and Elevance Health. Investors were concerned that Molina, which also has significant exposure to government-sponsored health plans, could face similar pressures on its profitability, leading to a broad sell-off across the industry.
Molina Healthcare is down 34.9% since the beginning of the year, and at $186.96 per share, it is trading 48.2% below its 52-week high of $360.77 from September 2024. Investors who bought $1,000 worth of Molina Healthcare’s shares 5 years ago would now be looking at an investment worth $1,044.
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