Shares of Managed Care Organizations and hospital names are under pressure on Monday after Bernie Sanders, a leading proponent of "Medicare for All," won the Nevada Democratic presidential caucus. Meanwhile, DA Davidson analyst Tom Forte argued that a Sanders' presidency would be most favorable to Roku (ROKU) and least to Apple (AAPL) among consumer electronics names he covers.
SANDERS WINS NEVADA CAUCUS: Bernie Sanders won the Nevada Democratic presidential caucus, cementing his front-runner status and sending Managed Care Organization and hospital stocks like Anthem (ANTM), Centene (CNC), CVS Health (CVS), Humana (HUM), Molina Healthcare (MOH), UnitedHealth (UNH), Community Health (CYH), HCA Healthcare (HCA), and Tenet (THC) lower.
In a note to investors last week, after Michael Bloomberg had a "rough" outing in his first Democratic debate, Stephens analyst Scott Fidel argued that a second term for Donald Trump would be a "best-case scenario" for MCO stocks, while a nomination of Bernie Sanders "creates Black Swan risk that would not be so starkly present" with Bloomberg.
SANDERS BETTER FOR ROKU, WORSE FOR APPLE: DA Davidson analyst Tom Forte told investors in a research note that he sees a Bernie Sanders' presidency as most favorable to Roku and least to Apple among the consumer electronics stocks he covers. Because of his understanding that Sanders is running on providing broadband Internet to all consumers, and Roku's ability to exploit this opportunity including via its advertising efforts and by selling consumers its proprietary hardware or having consumers purchase smart TV's with its operating system, he believes at this time that Roku would be most positively impacted if Sanders became President and implemented that policy.
With the notion that any of the Democratic candidates may result in a situation where there is less news coming out of Washington D.C. and on the assumption that the core consumer of QVC/HSN has been distracted since the 2016 presidential election primaries, Qurate Retail Group (QRTEA) stands to benefit from someone other than President Trump in office, Forte also contended. However, Forte noted that the company first has to deal with what should be a highly distracted core consumer through, at least, the election.
Because of his understanding that Sanders is running on ending corporate tax breaks and Apple's position as one of the largest tax paying companies in the U.S., at this time Forte also believes Apple would be most negatively impacted among the stocks he covers if Sanders became President and implemented that policy. Further, the analyst thinks the tax cuts freed up additional capital for Apple to return money to shareholders via buybacks, which contributed to the strong performance of its stock in 2019, in particular.
Additionally, Forte noted that there are multiple policies of Sanders that could be favorable to Amazon (AMZN), but he believes the company would be negatively impacted if Sanders became President and enacted his policies. Amazon is not nearly as profitable as Apple, but it is, increasingly, profitable and the end of corporate tax breaks would negatively impact the company, Forte argued. The analyst added that Sanders also has stated a desire to double the size of unions, which could be the biggest damage as it would materially increase the cost of Amazon's labor.
PRICE ACTION: In late morning trading, shares of Anthem and Humana have dropped 6%, Centene’s stock has slipped 9%, and CVS Health has slid 4%. Also lower, Molina Healthcare has dropped 8%, UnitedHealth has slipped 7%, and Community Health has plunged 13%, while HCA Healthcare and Tenet have each slid about 5%.
Ticker changed to ELV
-15.17 (-5.15%)
Centene
-5.61 (-8.58%)
CVS Health
-2.88 (-4.03%)
Humana
-20.06 (-5.43%)
Molina Healthcare
-10.81 (-7.22%)
UnitedHealth
-20.525 (-6.81%)
Qurate Retail
-0.33 (-3.56%)
Amazon.com
-90.71 (-4.33%)
Apple
-13.07 (-4.18%)
Roku
-6 (-5.03%)
Tenet Healthcare
-1.65 (-4.83%)
HCA Healthcare
-6.86 (-4.63%)
Community Health
-0.91 (-12.67%)