Trade of the Day: WCG Stock About to Come Crashing Down

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WellCare Health Plans, Inc. (WCG) — This health care company provides managed care services for government-sponsored programs including Medicaid and Medicare.

According to S&P Capital IQ Equity Research, WellCare’s dependence on Medicaid and Medicare reimbursement, which are subject to potential government cutbacks, and competition for state Medicaid contracts make WCG stock high risk. Its analysts expect slower membership growth and lower Medicare Health Plan revenue. They also note that total revenue growth is expected to slow to 1.4% in 2016, down significantly from 8.5% in 2015 and 34.4% in 2014.

Capital IQ recently lowered its 12-month price target for WCG stock by $6 to $86 and rate shares a “Hold.” Credit Suisse is even more bearish, rating WCG stock “Underperform” with a price target of $75.

Strong revenues and earnings pushed WCG stock up from below $60 in October 2014 to a high just below $99 in September 2015. After topping there, shares fell in a broad channel, dropping under $70 in early February.

By early March, WCG stock had bounced back above $90, and it hit a high of $94.21 on March 7, rallying more than 35% in a month. Now, however, it appears to have formed a type of rounding top and may offer an opportunity for short sellers, especially considering lower expected revenues.

Sell WCG stock short at $90 with a downside price target of $75 for a potential return of 17%. As with all short sales, traders should protect against the possibility of theoretically unlimited losses by placing a stop-loss order at $95.

WCG Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2016/03/wellcare-health-plans-inc-wcg-stock-trade-day/.

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