A Stifel Nicolaus analyst upgraded shares of WellPoint Inc. Tuesday, saying the stock will rise about 20 percent this year as the health insurer beats expectations and investors take a more optimistic view of the industry.
Thomas Carroll raised his rating on WellPoint shares to "Buy" from "Hold." He expects health insurer stocks to advance in 2010, now that investors understand what health care overhaul would mean for the business. He said profit expectations are modest but insurers should have a better year than they did in 2009.
"As the health care reform debate diminishes, we believe investors will continue their recent return to managed care stocks in the first half of 2010 with a large cap bias," he said. Based on enrollment and revenue, WellPoint and UnitedHealth Group Inc. are the two biggest publicly traded health insurers.
Carroll expects WellPoint to earn $6.31 per share this year. On average, analysts polled by Thomson Reuters are forecasting $6.09 per share.
Carroll holds a price target of $72 per share. That is 20.5 percent above WellPoint's Monday closing price of $59.75. The shares have doubled in value since March, but have not traded at $72 since early 2008.
In premarket trading, shares rose 38 cents to $60.13.