Magellan To Benefit From Renewed Interest In Outsourcing Ancillary Contracts

Analysts at Citigroup initiate coverage of Magellan Health Services MGLN with a "buy" rating. The target price for MGLN is set to $47. According to Citigroup, “Our analysis and discussions with industry contacts suggest a renewed interest by some larger health plans in outsourcing ancillary contracts, including behavioral health. In addition, the state of New Mexico is planning on an RFP for its Medicaid behavioral health contract, although we are still waiting for the RFP to be released. The New Mexico contract would add $250-300 million in revenue and a little more than $10 million in EBITDA.” “EBITDA has grown dramatically following the acquisitions of National Imaging Associates and ICORE, while the share repurchase has occurred at a discount to the current share price… By our count, roughly 55% of Magellan’s revenue are Medicaid related. This could be a short-term negative, as Medicaid rates remain under pressure because of the bad economy, but it should disproportionately aid Magellan’s growth in later years as Medicaid expansion begins,” the analysts say. More Analyst Ratings here.