Why Molina Healthcare (MOH) is a Must-Buy for Contrarians

Let me cut through the noise and tell you why Molina Healthcare (MOH) is a contrarian gem right now. The stock is trading at $322.20 as of May 9, 2025—well below its $423.46 52-week high—despite having the fundamentals to push it much higher. Here's why you should be buying now, even with the near-term headwinds.

1. Undervalued? You're Looking at a 17% Upside Target

Molina is a textbook case of a company trading at a discount to its growth story. Let's start with the numbers:

• P/E Ratio: 13x in 2025 vs. peers averaging 14x–19x.
• Analyst Targets: J.P. Morgan sees $420, Wells Fargo $372, and Baird $375—all well above today's price.
• Embedded Value: New Medicaid contracts and acquisitions add $8.65 per share in untapped value.

The market isn't pricing in the full potential here. Molina's conservative guidance of $24.50 EPS creates a low bar for upside surprises, especially if Medicaid rates and cost controls improve.

2. Strong Fundamentals: Growth, Diversification, and Discipline

Molina isn't just surviving—it's thriving. Let's break down the key drivers:

Revenue Growth:

• Q1 2025 revenue hit $11.1 billion, a 12% jump year-over-year, fueled by Medicaid expansion and Medicare Advantage wins.
• Premium Revenue Guidance: $42 billion for 2025—9% growth from 2024.

Membership Momentum:

• 5.8 million members as of March 2025, up 25,000 year-over-year.
• The ConnectiCare acquisition added 60,000 ACA members, and the Illinois D-SNP win is a $300+ million annual revenue boost by 2026.

Cost Management:

• Medicaid's Medical Care Ratio (MCR) was 89.2% in Q1—manageable given rate increases.
• Medicare MCR dropped to 88.3%, and Marketplace MCR (81.7%) improved when excluding ACA subsidy headwinds.

3. Growth Catalysts: The Fuel for a Turnaround

Molina isn't just waiting for the next earnings report. It's actively building its future:

New Contracts and Acquisitions:

• Secured a $300 million+ Illinois D-SNP contract in 2026.
• The ConnectiCare deal gives Molina a foothold in high-growth ACA markets.

Medicare Advantage Expansion:

• Medicare membership is a high-margin segment; Molina's push into this area could boost margins as the population ages.

Share Buybacks:

• Spent $500 million on repurchases in Q1 2025, reducing shares outstanding and lifting EPS.

Regulatory Tailwinds:

• Medicaid rates are rising in key states like California and Texas to offset inflation—a direct margin booster.

4. Risks? Yes, But They're Priced In

Let's address the skeptics:

MLR Volatility:

• The ACA segment's 81.7% MCR is elevated due to subsidy clawbacks and improper enrollments. But management insists this is one-time noise—exclude those factors, and the MLR drops to 77.7%.

Regulatory Uncertainty:

• Republicans may nibble at Medicaid funding, but big cuts are politically toxic. Molina's CEO says proposed reductions are “marginal.”

Insider Selling:

• A few executives sold shares in Q1—but not because they're worried. They're making portfolio adjustments while $176 million of insider stakes remain. Fidelity and Voloridge are buying, not selling.

5. The Contrarian Play: Buy Now, Wait for the Pop

Here's the bottom line: Molina is a buy at $322.20. The stock trades at a 74% discount to its fair value, and the July 23 Q2 earnings report could blow past expectations if Medicaid rates and MLR improve.

Action Plan:
- Buy on dips below $320—this is a rare entry point.
- Hold through Q2 earnings (July 23). A strong report could push shares to $370+ by year-end.

Final Verdict: A Contrarian's Dream

Molina Healthcare is a buy for investors willing to look past near-term noise. With undervalued multiples, diversified revenue streams, and catalysts like Medicaid rate hikes and Medicare expansion, this stock is primed for a rebound. The risks are real, but they're already baked into the price. If you're in for the long haul, this is your moment.

Don't miss the train—act now.