Centene Stock Falls 40%, Should You Buy Now?

Centene shares dropped 40% after withdrawing its 2025 full-year guidance due to lower-than-expected growth in the Affordable Care Act exchange market and higher morbidity among patients. The preliminary expected impact on the company's diluted EPS is $2.75, or 38% of the previously expected $7.25. Wall Street now sees a more attractive valuation in Centene, with a 12-month stock price forecast of $68.87, a 108.31% upside from the current price.

Centene Corporation (CNC) saw its stock drop by nearly 40% on July 2, 2025, after the company withdrew its full-year 2025 guidance due to unexpected challenges in its Affordable Care Act (ACA) Exchange risk adjustment calculations and elevated Medicaid cost trends. The withdrawal of guidance stemmed from preliminary data received from Wakely, an independent actuarial firm, which indicated that market growth in 22 of its states would fall short of expectations [1].

The analysis suggested that the overall market growth in these 22 states was lower than anticipated, and the implied market morbidity was significantly higher than the company's assumptions for risk adjustment revenue transfer. This led to a reduction in Centene's full-year net risk adjustment revenue transfer expectation by an estimated $1.8 billion, corresponding to an adjusted diluted EPS impact of approximately $2.75 [1]. The company also noted that while it didn't have information for its remaining seven Marketplace states, it anticipated an additional reduction in its net risk adjustment revenue transfer expectation due to the morbidity trends observed in the initial 22 states.

Centene's stock price, which had been trading near its 52-week low, experienced a significant drop following the announcement. The company's shares fell from around $28.19 to approximately $16.43, representing a 40% decrease. The announcement also had a broader impact on the healthcare sector, with other insurance companies such as Elevance Health, UnitedHealth Group, and Molina Healthcare also seeing their stock prices drop [1].

Despite the challenging news, Centene has indicated that its Medicare Advantage and Prescription Drug Plan businesses are performing better than anticipated in the second quarter of 2025. The company is also reassessing and resubmitting its 2026 marketplace rates to reflect the new data and expects to provide additional details during its second quarter earnings call scheduled for July 25, 2025 [2].

Investors and analysts have responded to these developments with mixed ratings. Morgan Stanley maintained its Overweight rating and $70.00 price target on Centene stock following the announcement, while TD Cowen maintained a Buy rating with a $73 price target. However, JPMorgan and UBS downgraded the stock, setting new price targets at $48 and $45, respectively [2].

The unusual circumstances and severe investor reaction have prompted national shareholders rights firm Hagens Berman to open an investigation into whether Centene may have violated the securities laws. The firm urges Centene investors who suffered substantial losses to submit their losses now [3].

References:
[1] https://www.fiercehealthcare.com/payers/centene-stock-sinks-insurer-withdraws-2025-guidance
[2] https://www.investing.com/news/analyst-ratings/centene-stock-plunges-as-company-withdraws-2025-guidance-on-aca-exchange-concerns-93CH-4120616
[3] https://www.prnewswire.com/news-releases/centene-corporation-cnc-investors-see-over-11-billion-of--shareholder-value-wiped-out-in-1-day-amid-independent-actuary-data-withdrawn-2025-guidance-hagens-berman-302498579.html