WellPoint stock ascends to a record $110 per share

Back to TopCommentsE-mailPrintBookmark and Share

WellPoint Inc.’s stock price has soared this year to heights the company has never seen.

But the 30-percent run-up has just managed to bring the giant health insurer back into the pack of its peers.

Indianapolis-based WellPoint saw its shares close July 9 at $110.87 per share, compared with less than $85 just five months ago.

Its rise during that period has been roughly three times faster than the Standard & Poor’s 500 index and faster than all other major health insurers other than Louisville-based Humana, which has enjoyed a 32-percent bump in its stock price.

wellpointBut even with that surge, investors are paying less for WellPoint’s stock—measured against its expected profits—than for its peers’. A share of WellPoint stock costs 12 times the earnings per share Wall Street analysts expect the company to generate in 2015, compared with a range of 13.5 to 17 for most other major health insurers.

“WellPoint shares trade at a discount to long-term sustainable earnings power,” wrote Brian Wright, an analyst at Sterne Agee, in a June 26 note to investors. He expects WellPoint’s stock, which trades under the ticker symbol WLP, to rise to $130. “We believe WLP is likely to deliver the most near-term EPS upside in ’14 of the large-cap health plans.”

The reason? Obamacare is proving to be a boon to the company, not the bust that many investors feared.

WellPoint’s business is concentrated in the small-employer and individual-insurance markets—far more so than its big insurer peers. Many investors feared Obamacare would lure many of those customers to buy on exchanges, where the company must compete with numerous other health plans for business.

But things have gone well so far. WellPoint CEO Joe Swedish told an investor conference on June 10 that the company could end up with 700,000 exchange enrollees.

“Enrollment has been, I think, a very strong success story for us,” Swedish said.

Wright, the Sterne Agee analyst, expects WellPoint’s individual health insurance plans to enroll 2.3 million this year versus 1.8 million last year. He expects individual enrollment to rise to nearly 4 million in 2016.

That growth has been fueled by the generous tax credits Obamacare makes available to buyers in the exchanges. According to data released by the Obama administration, 87 percent of enrollees in the federally run exchanges qualified for tax credits, which averaged nearly $3,200 per person.

DeVeydt DeVeydt

All WellPoint has to do to capitalize on this “new pipeline of growth” is to hold on to the market share it had before Obamacare, WellPoint Chief Financial Officer Wayne DeVeydt told investors in a June 4 presentation.

“That would translate into 3 million new lives in the next five years and $16 billion in new revenue from the public exchanges,” DeVeydt said.

It has worked out that way in Indiana, where WellPoint operates Anthem Blue Cross and Blue Shield. Anthem attracted two-thirds of the enrollees in the Obamacare exchange—identical to its share of the individual insurance market in Indiana before Obamacare.

The federal government is also paying to expand coverage under the Medicaid program for low-income residents as well as to allow a growing number of seniors to purchase privately managed Medicare Advantage programs. Including gains from those programs, WellPoint expects its revenue to increase $24 billion over the next five years.

Profits margins on publicly subsidized coverage are smaller than traditional commercial health insurance. Sterne Agee’s Wright estimates profits under Obamacare will run about 3 percent.

Even so, Wright expects WellPoint’s income from operations to surge from less than $3.7 billion last year to nearly $4.3 billion in 2016.

WellPoint executives have been bullish on Obamacare for at least a year. But the company’s performance in the first quarter finally convinced some skeptics. WellPoint’s health plans signed up 962,000 new members among employers and 121,000 new Medicaid members.

Kim Purvis, an analyst at Cross Currents Research LLC, wrote a sharply critical research note in late March titled “Optimism is not a Strategy.” But a month later, she changed her tune, with a report titled “Strong Trends All Around.”•


  • ACA Is A Success Waiting to be Recognized
    Hmmm....let's think about this. Many health-care related stocks are up in value, more people are covered by health insurance, small businesses are not failing, and people with employer sponsored health coverage have only been affected marginally at best by the ACA. Moreover, the quality of insurance plans has been improved due to the basic requirements of the ACA. In addition, insurance annual premiums increases have increased at a declining rate. The sky is not falling as many, mostly on the right side of the political spectrum, had predicted. In fact, none of this has happened despite the unrelenting efforts from the right to scream about the evil affects of the ACA. Now its time for all to work together to make the ACA more effective and more efficient.
  • "Obamacare"
    It's not called "Obamacare". It's called the "Affordable Healthcare Act".

Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. Of what value is selling alcoholic beverages to State Fair patrons when there are many families with children attending. Is this the message we want to give children attending and participating in the Fair, another venue with alooholic consumption onsite. Is this to promote beer and wine production in the state which are great for the breweries and wineries, but where does this end up 10-15 years from now, lots more drinkers for the alcoholic contents. If these drinks are so important, why not remove the alcohol content and the flavor and drink itself similar to soft drinks would be the novelty, not the alcoholic content and its affects on the drinker. There is no social or material benefit from drinking alcoholic beverages, mostly people want to get slightly or highly drunk.

  2. I did;nt know anyone in Indiana could count- WHY did they NOT SAY just HOW this would be enforced? Because it WON;T! NOW- with that said- BIG BROTHER is ALIVE in this Article-why take any comment if it won't appease YOU PEOPLE- that's NOT American- with EVERYTHING you indicated is NOT said-I can see WHY it say's o Comments- YOU are COMMIES- BIG BROTHER and most likely- voted for Obama!

  3. In Europe there are schools for hairdressing but you don't get a license afterwards but you are required to assist in turkey and Italy its 7 years in japan it's 10 years England 2 so these people who assist know how to do hair their not just anybody and if your an owner and you hire someone with no experience then ur an idiot I've known stylist from different countries with no license but they are professional clean and safe they have no license but they have experience a license doesn't mean anything look at all the bad hairdressers in the world that have fried peoples hair okay but they have a license doesn't make them a professional at their job I think they should get rid of it because stateboard robs stylist and owners and they fine you for the dumbest f***ing things oh ur license isn't displayed 100$ oh ur wearing open toe shoes fine, oh there's ONE HAIR IN UR BRUSH that's a fine it's like really? So I think they need to go or ease up on their regulations because their too strict

  4. Exciting times in Carmel.

  5. Twenty years ago when we moved to Indy I was a stay at home mom and knew not very many people.WIBC was my family and friends for the most part. It was informative, civil, and humerous with Dave the KING. Terri, Jeff, Stever, Big Joe, Matt, Pat and Crumie. I loved them all, and they seemed to love each other. I didn't mind Greg Garrison, but I was not a Rush fan. NOW I can't stand Chicks and all their giggly opinions. Tony Katz is to abrasive that early in the morning(or really any time). I will tune in on Saturday morning for the usual fun and priceless information from Pat and Crumie, mornings it will be 90.1