Anthem Inc (ANTM) — ANTM stock fell 1% on Thursday as the health care sector retreated following Wednesday’s big jump on the dissolution of the planned $150 billion merger between Pfizer Inc. (PFE) and Allergan plc (AGN). But both the fundamentals and technicals are telling us now is a great time to purchase ANTM stock.
Anthem is one of the largest health insurers in the United States with more than 38 million members, many covered under Blue Cross Blue Shield licenses. In July, Anthem agreed to acquire CIGNA Corporation (CI) for $54.2 billion, which would bring its member count to 53 million.
Analysts at S&P Capital IQ Equity Research expect the planned merger to clear regulatory hurdles and say it should lead to market expansion and significant cost savings. They also expect Medicaid enrollment growth due to Anthem’s purchase of Amerigroup, as well as improvement in Medicaid margins.
Capital IQ rates ANTM stock a “Buy” with a 12-month target of $190. Its analysts expect earnings growth of 7.3% in 2016 to $10.90 per share on revenue growth of 3.3%.
Turning to the chart, ANTM stock made an all-time high above $173 in June. After falling from that peak, it began a consolidation in January. The January low near $127 evolved into the left shoulder of an inverse head-and-shoulders pattern, while the head of the formation occurred with the low at $115.63 made in early February.
From that low, ANTM stock staged a one-month rally that ran through the 50-day moving average near $133, forming the right shoulder. And in March, demand drove shares through the neckline at $142.
After a break of a neckline, a stock often undergoes a minor retreat before breaking out again. And that’s exactly what occurred with ANTM stock in late March. Then, on April 1, shares broke through the neckline and 200-day moving average, forming a bullish flag.
The target for the inverse head-and-shoulders pattern is $168, which is 17% above the market price. Anthem also pays a quarterly dividend of 65 cents per share for a forward annual yield of 1.8%, and the next ex-dividend date is expected in early June.
