NEW YORK -- Shares of AmeriGroup Corp. rose Monday after a Collins Stewart analyst recommended buying the insurer's stock after the passage of landmark health care legislation.
AmeriGroup shares added $1.45, or 4.6 percent, to $32.84 in afternoon trading after rising to a 52-week high of $33.66 earlier in the session.
Analyst Brian Wright said Amerigroup, based in Virginia Beach, Va., will be a prime beneficiary of the legislation, which he expects will bring more than 30 percent increase in the expansion of the Medicaid population in the next four years.
"While the recent run up in AGP shares from about $25 had anticipated the favorable impact of health care reform on the company, we do not believe the full impact is embedded in the valuation with shares," said Wright in a note to clients, referring to the company by its New York Stock Exchange ticker symbol.
The analyst also thinks the company will benefit in the near term by state budget problems, which will cause further shifts to managed care in Medicaid's programs for the aged, blind and disabled.
House Democrats voted 219-212 late Sunday to send the health care legislation to President Barack Obama, who is expected to sign it soon.
Wright set a $39 price target and repeated his projection for 2011 profit of $2.60 per share. That's above the $2.50 forecast, on average, by analysts polled by Thomson Reuters.
For the current fiscal year, Wall Street expects profit of $2.19 per share, while Wright sees profit of $2.40 per share.