AGL

On Wednesday, March 23rd, 2023, we interviewed an investor on his short thesis for Agilon Health Inc (AGL). He believes the company has a great combination of red flags including poor quality financial metrics, misconstrued valuation, regulatory risk with Medicare Advantage Risk Adjustment Data Validation (RADV), large secondary risk from its private equity owner, and competition from vertically integrated companies and payors. Even with conservative assumptions, the investor models significant downside and expects catalysts in the next two weeks as AGL’s upcoming Investor Day is March 30th and a CMS implementation ruling is expected on April 3rd.

Publicly traded companies mentioned herein: Agilon Health Inc (AGL), CVS Health Corp (CVS), Humana Inc (HUM), Oak Street Health Inc (OSH), Privia Health Group Inc (PRVA), UnitedHealth Group Inc (UNH), Wells Fargo & Co

Highlights

The presenter is short shares of Agilon Health Inc (AGL), which acts as a broker between Medicare and doctors to benefit from the fee-for-service (FFS) transition to the value-based care (VBC) model. AGL has grown ~50% each of the last three years, but the presenter finds the company’s accounting practices aggressive, invalidating the current valuation, and sees near-term risk to revenue from upcoming Medicare audits. There could be some short-term headline risk to the short position given AGL will host an Investor Day on March 30th, where the management team could portray a bullish long-term opportunity. That said, his price target over the next 12 - 18 months is $8 – $14 from the current $28.