We came across a bullish thesis on Molina Healthcare, Inc. (MOH) on Substack by Long-Term Pick. In this article, we will summarize the bulls’ thesis on MOH. Molina Healthcare, Inc. (MOH)'s share was trading at $266.57 as of Feb 12^th. MOH’s trailing and forward P/E were 13.05 and 10.86 respectively according to Yahoo Finance.

Molina Healthcare (MOH) is a prominent provider of affordable healthcare, particularly focusing on low-income populations. The company recently reported mixed results for the fourth quarter of 2024, surpassing revenue expectations but missing earnings due to higher medical spending in its Medicaid segment. Despite these challenges, Molina remains optimistic about future growth, particularly from its new Medicaid and Medicare contracts, which are expected to drive long-term expansion. The company's new fair value estimate is $378, reflecting the impact of higher-than-expected costs and the lower earnings guidance for 2025, which includes the implementation expenses tied to these new contracts.

Despite the short-term difficulties, Molina had a strong performance in 2024. Premium revenue increased by 19% year-over-year, reaching $38.6 billion, driven by strong results in the Marketplace segment. Molina also saw growth in net income, with GAAP net income per diluted share rising by 9% to $20.42 and adjusted net income per share increasing by 8% to $22.65. These solid results highlight the company’s ability to expand even amid operational pressures. Looking ahead to 2025, Molina expects premium revenue to reach approximately $42 billion, with adjusted earnings per diluted share of at least $24.50, signaling continued growth potential.

However, there were some negative aspects to consider. Operating cash flow dropped significantly, from $1.66 billion in 2023 to $644 million in 2024. Additionally, cash and investments at the parent company declined to $445 million as of December 31, 2024, compared to $742 million the previous year. Another concern is the higher-than-expected Medical Care Ratio (MCR) for Medicaid, which was impacted by redetermination-related acuity shifts.

Overall, Molina Healthcare remains a promising investment with a target price of $378 due to strong growth in the Marketplace and positive long-term prospects driven by its Medicaid and Medicare contracts. While facing some short-term headwinds, the company is positioned to capitalize on growth opportunities in the coming years.

Molina Healthcare, Inc. (MOH) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held MOH at the end of the third quarter which was 45 in the previous quarter. While we acknowledge the risk and potential of MOH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MOH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.