Stifel positive on agilon health despite recent Citron short report

By Sam Boughedda

agilon health Inc (NYSE:) was initiated with a Buy rating and $23 per share price target at Stifel on Friday.

The Buy rating comes not long after short-selling investment research firm Citron released a report criticizing the company, stating “the best days of Agilon are behind it,” and the firm “unknowingly got torpedoed” by the U.S. Supreme Court without Wall Street noticing.

However, Stifel analysts told investors in a note that they “estimate agilon can increase a provider groups’ total revenue per PCP by ~$50,000 in year 1 to $180,000+ by year 4.”

“Large TAM/Low Penetration. agilon has a large $125 billion MA TAM growing close to 10% per year and a $158 billion DC TAM, which we expect to remain largely flat. agilon only has 2% market share in MA and less than 1% of the potential DC market,” wrote the analysts. “agilon grew 51% in 2021, and guided to 46% growth in 2022. We are projecting growth of 51% in 2023 and 35% in 2024, both ahead of consensus.”

However, Stifel believes the estimates are “reasonable to conservative,” as U.S. MA member growth grows close to 10% and “capitated PMPM pricing grows by mid-single digits.”

“agilon offers relatively high exposure to the U.S. healthcare transition to value-based care on a platform model that is very capex and opex light. We expect agilon to continue to grow 30%+ in the medium term while expanding margins and to begin generating cash in 2023, with $1 billion in cash and no debt on the balance sheet,” they concluded.

agilon shares are up 1% at the time of writing.