Evolent selloff on MCOs’ utilization comments ‘way overdone,’ says RBC Capital

RBC Capital notes Evolent Health (EVH) is now down about 10% following UnitedHealth’s (UNH) disclosures on June 13 and Humana’s (HUM) comments yesterday on Q2 utilization trends. However, the analyst views this as “an unfortunate case of (Evolent) being thrown out with with the rest of the MCO and VBC bathwater” and sees this pullback as an overreaction that presents “a very attractive entry point into what continues to be one of our favorite value-based care ideas for the year.” What RBC thinks is being misperceived here is that while about 56% of Evolent’s revenue is derived from its Performance Suite, where it takes risk, the “vast majority of that risk” is tied to Oncology and Cardiology, not Musculoskeletal. The firm, which adds that it thinks it is likely that what both UnitedHealth and Humana are experiencing “end up being a net positive” for Evolent, keeps an Outperform rating and $44 price target on the shares.