Morgan Stanley downgraded Humana from Equalweight to Underweight and cut its price target to $174.00 from $262.00, citing concerns that an unfavorable Advance Rate Notice has raised policy risk and complicated the insurer's 2026 bid strategy. The firm said these developments could hamper Humana's multi-year turnaround plan.
The bank's revised $174 target corresponds to a 9.1x 2027 P/E multiple, compared with managed care organization peers trading at about a 10.0x multiple. Morgan Stanley noted that Humana shares have already fallen roughly 24% year-to-date and described current valuations as "trough multiples," but warned that valuation could be less attractive than it appears if 2026 and 2027 earnings estimates are pressured.
Humana's stock was trading at $195.20 at the time of the note and has plunged nearly 26% over the past week. Morgan Stanley framed the move as a relative call against other managed care companies, stating it sees more compelling positioning among UnitedHealth, CVS, and Cigna amid ongoing industry disruption.
The downgrade arrives in the wake of broader industry volatility after the Centers for Medicare & Medicaid Services announced a 0.09% increase in Medicare Advantage payment rates for 2027. That adjustment fell well short of analyst expectations of up to 6% and has sparked a sector-wide selloff that has affected UnitedHealth and competitors, including Humana and CVS Health.
Separately, Humana has initiated a partnership with Atlas Oncology Partners intended to enhance cancer care for eligible Medicare Advantage members in Tennessee and Mississippi. The program, which began in January 2026, is designed to integrate interdisciplinary teams to simplify cancer care delivery for those members.
Humana is also managing an insurance-segment leadership transition. George Renaudin is scheduled to retire by the third quarter of 2026. Aaron Martin will join Humana in January 2026 as President of Medicare Advantage and is expected to succeed Renaudin, while John Barger will be promoted to President of Medicare Advantage following Renaudin's departure.
Market participants have also noted differences in projected Medicare Advantage growth. Piper Sandler highlighted that the CMS notice implies a 4.97% Effective Growth Rate, which is below its earlier estimate of 6.47%.
Context and implications
Morgan Stanley's downgrade focuses on near-term policy and bidding uncertainties that could pressure earnings and multiples for Humana in 2026 and 2027. The combination of a sharply lower price target, recent share-price weakness, and sector-wide headwinds from CMS guidance contributes to a more cautious view of Humana's stock relative to peers.