Why Elevance Health (ELV) Could Be a Strategic Buy-The-Weak Moment in 2026

The stock market often creates mispricings, but few opportunities are as compelling as Elevance Health (ELV) in the lead-up to 2026. A combination of extreme valuation dislocation, a bullish analyst upgrade, and near-term growth catalysts in Medicare Advantage and Medicaid positions ELV as a prime candidate for a re-rating. For investors with a long-term horizon, the current discount to intrinsic value-supported by robust discounted cash flow (DCF) analysis-offers a compelling margin of safety.

DCF Valuation: A Stark Disconnect from Market Price

Elevance Health's intrinsic value, as calculated by DCF models, is a staggering 68.5% higher than its current market price of $340.69, with estimates placing fair value at $1,082 per share. This disconnect is not a temporary anomaly but a structural underappreciation of the company's cash flow potential. A 2 Stage Free Cash Flow to Equity model projects free cash flow to reach $8.7 billion by 2029, with further growth expected into the next decade. Even conservative intrinsic value calculations as of late 2025 suggest the stock is undervalued by 151.9%, while a January 2026 update still shows a 40% discount to intrinsic value.

The undervaluation is further reinforced by Elevance's valuation multiples. Its Price-to-Earnings (PE) ratio of 13.7x is far below the healthcare industry average of 23.6x and the peer group average of 23.3x. Simply Wall St's Fair Ratio framework argues the stock deserves a PE of 32.6x, a level that would align with its projected earnings power and risk profile. This suggests the market is not only underestimating Elevance's fundamentals but also failing to account for its operational resilience.

Wolfe Research's Outperform Upgrade: A Catalyst for Re-Rating

Wolfe Research's recent upgrade of Elevance to Outperform with a $425 price target adds a critical layer of credibility to the re-rating thesis. Analyst Justin Lake argues that 2026 will mark the bottom of Elevance's earnings and margin cycle, with conservative EPS guidance expected around $25.50. This includes a 200 basis points reduction in Medicaid margins year-over-year, a move that de-risks downside potential while preserving long-term upside.

The firm highlights untapped earnings power in Medicaid, where margins are expected to stabilize, and Medicare Advantage, which is poised for growth in 2026 and health exchanges in 2027. These dynamics align with Elevance's strategic focus on high-growth segments of the managed-care sector. With a price target 21% above the current price, Wolfe's upgrade signals a near-term inflection point that could trigger broader market recognition of Elevance's value.

Near-Term Growth Tailwinds: Medicare/Medicaid as a Double-Engine

Elevance's operational performance in 2025 underscores its ability to navigate headwinds. Despite a 12% year-over-year increase in operating revenue and an adjusted operating margin of 2.7% in Q3 2025, the company's benefit expense ratio rose to 91.3%, reflecting elevated medical costs. Yet, Elevance continues to outperform peers in managing these challenges, a testament to its underwriting discipline and cost controls.

The Medicare Advantage and Medicaid segments are particularly compelling. Medicare Advantage enrollment is expected to grow as beneficiaries shift away from traditional Medicare, while Medicaid expansion in key states provides a stable, high-margin revenue stream. These segments are not only resilient but also offer Elevance a path to scale its low-cost, high-efficiency model. With the company's market share in these areas expanding, the potential for earnings recovery is tangible.

The Re-Rating Play: Capturing Mispricing Ahead of Earnings Recovery

The convergence of DCF-driven undervaluation, analyst upgrades, and near-term growth catalysts creates a rare setup for a re-rating. Elevance's current valuation-trading at a discount to both intrinsic value and fair multiples-reflects a market that is not fully pricing in its future cash flow potential. As Medicare Advantage and Medicaid growth materialize in 2026, and as margins stabilize, the stock is likely to see a correction in its valuation multiple.

For investors, the key is to act before this re-rating gains momentum. The current environment offers a wide margin of safety, with DCF models suggesting the stock could appreciate by over 200% if it reaches its intrinsic value. Even a more conservative scenario, where the stock aligns with Wolfe Research's $425 target, would represent a 25% return in a year marked by sector-wide volatility.

Conclusion

Elevance Health's combination of extreme undervaluation, a bullish analyst upgrade, and near-term growth tailwinds in Medicare Advantage and Medicaid makes it a standout opportunity for 2026. The market's current discount to intrinsic value reflects a failure to appreciate the company's operational strength and strategic positioning. As the sector enters a recovery phase, investors who act now could capture a re-rating that mirrors the magnitude of the current mispricing. For those with a long-term horizon, ELV represents a compelling case of buying the weak moment.