Lehman Brothers upgraded PacifiCare Health Systems (PHS ) to overweight from equal-weight. Lehman also raised its price target on the stock to $45.
Analyst Joshua Raskin believes Medicare will serve as a compelling growth opportunity for the managed care industry over the next couple of years. He thinks PHS is better positioned than virtually all of its competitors to take advantage of that opportunity. He estimates revenues could exceed $20 billion in 2006; this could lead to EPS power of $5.25.
Also, Raskin thinks PacifiCare represents a reasonable takeover candidate. He expects a more constructive view on the Medicare program to help valuation. He argues that PHS shares deserve a group multiple. He raised his EPS forecasts from $3.00 to $3.05 for 2004 and from $3.60 to $3.75 for 2005.