EVH - Moving to Hold on Recent Share Price Move & Medicaid Headwind Heading Into 2027

Research evidence excerpt

EVH - Moving to Hold on Recent Share Price Move & Medicaid Headwind Heading Into 2027

Truist Securities

contribution. The Technology & Services business is seeing a modest headwind because of the exchange enrollment decline. Roughly

50% of revenue this year is expected to come from new contracts, with Highmark representing a large portion of that. Highmark was a

drag at the beginning of the year and in the first half, which supports the expected second-half improvement. EVH has noted in the past

that the company's overall MER peaks in 2Q and improves in 3Q. While EVH has noted that early implementation, prior authorization

activity, and intervention tracking for new contracts have been going as planned, the company would still likely book close to forecast until

claims data confirms outperformance even if intervention rates appear strong. 2Q includes a significant explicit margin impact from new

business load tied to Highmark, that burden goes away in 3Q, and some of it may reverse in 4Q. However, 3Q should be “unburdened”

by the explicit margin drag associated with new business load, which is one of the key drivers of sequential improvement.

Acceleration in New Contract Awards Would Represent Upside Risks to Our Call: EVH continues to see significant oncology demand,

as payers remain concerned about trend and the cost flowing through the system. The company's updated corridor structure has also

helped support demand, particularly in oncology. EVH could announce additional deals in Performance Suite but is unlikely to implement

any new contracts in 2026 and any new contracts in 2027 are unlikely to contribute meaningfully to EBITDA in 2027. However, EVH

could still roll out some Technology & Services opportunities that can be implemented during 2026.