Wells Fargo Upgrades HCA Healthcare (HCA) As Risks Appear Priced In

On May 29, an analyst from Wells Fargo upgraded HCA Healthcare Inc. (NYSE:HCA) to Equal Weight from Underweight and increased the price target to $385 from $320, as he believes that the risks associated with the budget reconciliation bill are now factored into the company’s valuation.

The House recently passed the fiscal year 2025 budget reconciliation bill by a narrow vote of 215-214. According to various reports, this legislation is expected to have a significant impact on Medicaid and the Health Insurance Marketplaces. Following the bill’s passage, Rick Pollack, the President and CEO of the American Hospital Association (AHA), stated that it would reduce federal support for the Medicaid program by over $700 billion over the next decade, impacting healthcare coverage for millions of Americans.

Despite this, the analyst views the House’s passage of the bill as a positive for the company due to the reduced uncertainty on its impact over the company’s business. The bill has moved to the Senate for further scrutiny and the scale of potential healthcare spending cuts is clearer. In fact, the analyst sees a potential upside as there is also a possibility that the Senate may amend the bill to protect specific sectors from the proposed reductions.

Nonetheless, the analyst acknowledged that HCA will continue to face headwinds from coverage-related challenges but believes that these risks are now more manageable.

HCA Healthcare Inc. operates 186 hospitals and approximately 2,400 sites of care across 20 U.S. states and the United Kingdom.

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