Centene, Molina cut at Morgan Stanley on near-term headwinds

Morgan Stanley downgraded Centene (NYSE:CNC) and Molina Healthcare (NYSE:MOH) to Equal-Weight from Overweight on Thursday, arguing that the two Medicaid-focused rivals’ near-term challenges offset the positives cited in the firm’s coverage initiations.

The downgrade came after Centene (NYSE:CNC) withdrew its 2025 outlook last week, citing a worse-than-anticipated cost trend in its Medicaid division and an unexpected underperformance in its Affordable Care Act (ACA) plans business.

Days later, rival Molina (NYSE:MOH) announced preliminary Q2 results with a downward revision to its prior expectations, a decision the company attributed to medical cost pressures across all three lines of its business.

“As the dust settles, we are downgrading CNC and MOH, following incremental pressures across Exchange and other insurance lines of business,” Morgan Stanley analyst Erin Wright said, slashing her price targets on the stocks to $33 and $264 from $70 and $364 per share, respectively.

The analyst noted Centene’s (NYSE:CNC) comments, which indicated that, in contrast to UnitedHealth (UNH) and Molina (NYSE:MOH), the company’s Medicare Advantage and MA Prescription Drug Plans businesses were performing better than anticipated in Q2.

She also pointed out that Molina (MOH) has reaffirmed its long-term targets despite the recent passage of President Donald Trump’s One Big Beautiful Bill Act, which called for funding cuts for Medicaid.

“That said, another setback for a space that is already shrouded in trepidation leaves us with less conviction in NT forecasts for both CNC and, to a lesser extent, MOH (where it has less HIX exposure),” Wright wrote.