Top broker downgrades NIB shares to a sell rating

The NIB Holdings Limited (ASX:NHF) share price could come under pressure today after being downgraded by a leading broker…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The NIB Holdings Limited (ASX: NHF) share price has been a strong performer on the ASX 200 over the last three months.

Since hitting a 52 week low of $4.64 on December 11, the private health insurer's shares have rallied an impressive 27% higher.

Can this strong run continue?

One broker that isn't sure that this strong run can continue is Goldman Sachs.

According to a note out of the investment bank this morning in relation to the Australian insurance industry, its analysts have downgraded NIB's shares to a sell rating from neutral.

The broker made the move largely on valuation grounds after the company's shares rallied around 10% higher than its price target of $5.48.

In addition to this, its analysts remain reasonably bearish on the health insurance industry.

This is due to concerns over a number of challenges that the industry faces in the coming months. These include the pre-election release of the terms of reference for the Labor party's Productivity Commission, the outcome of the Federal election and industry design/implementation of the premium-cap, and the initial draft of APRA's new PHI capital standard.

Goldman suspects that these will be a negative for NIB and rival Medibank Private Ltd (ASX: MPL) and could weigh on margins and lead to a revision of their medium term strategies.

In light of this, the broker feels that the valuations of both these companies are once again looking stretched. Incidentally, Goldman has a sell rating and $2.48 price target on Medibank's shares.

Which insurance share does Goldman Sachs like?

The broker's preference in the insurance industry right now is Suncorp Group Ltd (ASX: SUN). It has a buy rating and $14.65 price target on the insurance giant's shares due to margin expansion opportunities and an attractive earnings per share growth outlook.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »