RBC Capital has shifted its view on Humana (NYSE:HUM), lowering the stock's rating from Outperform to Sector Perform and reducing the price target sharply to $189 from $322. The change comes as the insurer's shares trade at $175.40, down more than 31% year-to-date and roughly 44% below their 52-week high of $315.35.
The bank's reassessment centers on the interaction between unexpectedly strong membership growth during the Annual Enrollment Period (AEP) and an unclear reimbursement backdrop for Medicare Advantage. RBC warned this dynamic could create cost pressure in Humana's Medicare Advantage book that exceeds the company's initial 2026 Medical Cost Ratio (MCR) guidance.
RBC Capital analyst Ben Hendrix emphasized that Humana's management remains confident in the 2026 Medicare Advantage book. However, Hendrix said the combination of outsized membership gains and reimbursement uncertainty alters the risk-reward profile at the stock's current valuation, prompting a more neutral stance.
The new $189 price objective implies a valuation of 12.5 times RBC's revised 2027 earnings-per-share estimate, a meaningful reduction from the previous target. By comparison, Humana currently trades at a price-to-earnings multiple of 18.42 and yields 2.02% in dividends, having maintained dividend payments for 15 consecutive years.
Despite the downgrade, some market analysis indicates the stock may be undervalued. InvestingPro analysis signals that Humana is presently in oversold territory and that additional ProTips are available to subscribers assessing the name.
The RBC action arrives amid broader market scrutiny of Medicare Advantage profitability and rising attention to medical cost trends within government program businesses. Humana continues to report profitability and has a balance sheet characterized by more cash than debt, which the company cites as a financial strength.
Several other firms have recently adjusted their views or targets on Humana. Guggenheim lowered its price target to $252, pointing to an expected $1 billion net Stars headwind anticipated for 2026 even as Humana reported better-than-expected medical loss ratio results for the fourth quarter of 2025. Evercore ISI trimmed its target to $180 while retaining an "In Line" rating; the firm noted Humana's 2026 earnings-per-share guidance of over $9 aligns with its internal estimate but remains short of wider market expectations.
Morgan Stanley moved to downgrade Humana from Equalweight to Underweight and set a $174 target, citing concerns about the company's 2026 bid strategy and policy risks after receiving an unfavorable Advance Rate Notice. Piper Sandler has drawn attention to the Centers for Medicare & Medicaid Services' CY27 Medicare Advantage Advance Notice, which projects a 0.09% average revenue change for CY27 - markedly lower than the 5.06% average revenue change seen in CY26 - a shift that could pressure future revenue trends.
Taken together, these analyst adjustments and regulatory signals form a cluster of developments that investors will need to weigh when evaluating Humana's near-term financial outlook and strategic direction.
Summary
- RBC Capital downgraded Humana to Sector Perform and cut its price target to $189 from $322, citing Medicare Advantage cost risks tied to AEP membership growth and reimbursement uncertainty.
- Humana shares trade at $175.40, down over 31% year-to-date and about 44% below the 52-week high of $315.35; current P/E is 18.42 and dividend yield is 2.02% with 15 consecutive years of payouts.
- Other firms including Guggenheim, Evercore ISI, Morgan Stanley and Piper Sandler have also adjusted targets or ratings, and CMS advance notices project substantially lower revenue changes for CY27 versus CY26.
Key points
- Analyst action - RBC downgraded Humana and sharply reduced its price target to reflect an altered risk-reward profile at current multiples.
- Medicare Advantage risk - Rapid AEP-driven membership growth combined with uncertain reimbursement could pressure Humana's 2026 MCR.
- Sector implications - The developments add to scrutiny on health insurers and could influence investor sentiment across the insurance and broader healthcare sectors.
Risks and uncertainties
- Membership-driven cost pressure - Stronger-than-expected enrollment growth through AEP could result in medical cost trends that exceed Humana's 2026 MCR guidance, impacting profitability - a direct concern for investors in health insurers.
- Reimbursement uncertainty - An unclear reimbursement environment for Medicare Advantage creates planning risk and valuation uncertainty for Humana and peers operating in government program businesses.
- Policy and rate notices - Unfavorable Advance Rate Notices and CMS projections, including a CY27 average revenue change forecast of 0.09%, introduce revenue and policy risk that could affect future earnings across the Medicare Advantage market.