Is Humana Inc. (HUM) the Best Telehealth Stock to Buy Now?

The telehealth sector has undergone a seismic shift since the pandemic, with companies racing to adapt to new regulations and consumer expectations. For investors evaluating Humana Inc. (HUM) as a leading telehealth play, the question is whether its strategic moves and financial trajectory justify its status as a top stock. Let’s dissect the evidence.

Telehealth Initiatives: Expanding Access, Navigating Regulatory Headwinds

Humana’s telehealth strategy centers on strategic partnerships and geographic expansion, particularly in underserved markets. A standout is its $100 million investment in Heal, a telehealth startup offering in-home primary care visits. This partnership, launched in 2022, now serves Medicare and commercial members in markets like New York, California, and Washington, D.C., with plans to expand to Chicago, Houston, and Charlotte. The initiative aligns with Humana’s “Bold Goal” to improve community health outcomes, leveraging telehealth to reduce barriers for seniors and rural populations.

Humana has also partnered with Aledade, a value-based care platform, to support Federally Qualified Health Centers (FQHCs) in Medicare Advantage (MA) plans. This collaboration aims to enhance access in rural areas, where 65% of Aledade’s FQHC partners operate. In 2023, Aledade’s FQHC-focused ACOs achieved a 6.12% savings rate, translating to $423 in shared savings per beneficiary—a strong indicator of scalable success.

However, Medicare’s 2025 telehealth rules pose challenges. Starting January 1, most telehealth services require patients to be in rural-area facilities, except for mental health care. This could limit Humana’s ability to offer broad telehealth access from home, potentially restricting growth in urban markets.

Financial Performance: Revenue Growth vs. Profitability Struggles

Humana’s stock surged 10.36% in early April 遑 2025 on optimism around its partnerships and primary care investments. Analysts like Wolfe Research raised price targets to $339, citing long-term growth. Yet, the company’s profitability metrics are under pressure:

• Revenue: Projected to hit $126.14 billion in 2025, up 7.12% year-over-year.
• Margins: EBIT margin dipped to -0.8%, and net income fell to -$685 million in the latest quarter.
• Cash Flow: Operational cash flow turned negative, with free cash flow at -$2.895 billion, raising liquidity concerns.

The disconnect between top-line growth and bottom-line struggles stems from rising healthcare costs and regulatory headwinds. Medicare Advantage margins have shrunk from 3.6% (2019) to 1.1% (2024), squeezing profitability.

Analyst Sentiment: Buy or Hold?

Analyst ratings are mixed but cautiously optimistic. As of April 2025, the consensus is a “Moderate Buy”, with:
- 5 Buy ratings (e.g., Guggenheim, Mizuho).
- 11 Hold ratings (e.g., JPMorgan, Bank of America).

The average 12-month price target is $300, implying a 13.43% upside from recent prices. However, risks loom:

1. Legal Battles: Ongoing litigation with CMS over Medicare Stars ratings could drag FY2026 earnings.
2. Margin Pressures: Analysts like Bank of America warn that Medicare Advantage margins need a 100 basis point improvement to add $6/share to 2025 EPS.

Risks and Challenges: Liquidity, Regulation, and Competition

• Liquidity Concerns: Negative free cash flow signals a need for cost discipline.
• Regulatory Uncertainty: Medicare’s 2025 rules and CMS disputes could limit telehealth flexibility.
• Competitor Pressure: Larger players like UnitedHealth Group (UNH) and CVS Health (CVS) are aggressively expanding telehealth offerings.

Is HUM the Best Telehealth Stock?

Humana’s strengths lie in its strategic partnerships (e.g., Heal, Aledade) and geographic reach, positioning it to capitalize on the shift to value-based care. Its 7.12% revenue growth and expanding Medicare Advantage membership (27.7 million members) are compelling.

Yet, the negatives—negative margins, liquidity issues, and regulatory risks—demand caution. Investors should weigh:
- Upside: Long-term growth in Medicare Advantage and telehealth-driven access.
- Downside: Profitability challenges and legal uncertainties.

Conclusion: A Buy for Long-Term Investors, but Proceed with Caution

Humana is undeniably a leader in telehealth-enabled care, with partnerships and rural initiatives that align with Medicare’s evolving priorities. Its 7.12% revenue growth and analyst price targets ($300 average) suggest potential rewards. However, the current negative margins (-0.8%) and liquidity red flags require investors to adopt a disciplined approach.

The stock’s valuation (P/E of 25.55) reflects moderate optimism but may not yet account for margin recovery risks. For aggressive investors willing to hold through near-term volatility, HUM could be a buy, but only if Medicare Advantage margins stabilize and CMS disputes are resolved. For others, a wait-and-see stance until Q1 earnings (April 30) and the June investor conference may be prudent.

In the telehealth race, Humana has the tools to win—but the finish line remains uncertain.