The Hidden Engine Behind Elevance Health Stock’s Next Climb

Investors are rightly focused on the company's Medicaid struggles, but the real upside story may be hiding in plain sight across the rest of its business.

Elevance Health (ELV) stock has a history of rewarding patient investors, and with a gain of 18.8% over the last three months, it seems to be at it again. But look under the hood and you'll find a glaring issue that has analysts on edge: a Medicaid business projected to run at a negative 1.75% operating margin this year. That's a tough number to ignore.

So, what could possibly drive the stock materially higher from here? The answer may lie in looking everywhere but the segment grabbing all the headlines. The real opportunity is in the market recognizing that the rest of Elevance Health is strong enough to power through the Medicaid drag and deliver on its ambitious growth targets for next year.

A Turnaround Story in Medicare Advantage

For a case study in how Elevance can execute a turnaround, look no further than its Medicare Advantage business. After a period of what management calls "deliberate actions" to reposition the portfolio, the segment is now showing "clear evidence" of "stronger performance." The company is confident it's on a "path to at least a 2% operating margin this year" in that business. This forecast also serves as a proof point. It shows that when management applies disciplined plan design and focuses on a sustainable portfolio, it can deliver results. That's a powerful precedent as it applies the same tough-love approach to its other segments.

What About That Medicaid Problem?

There's no sugarcoating the Medicaid results. But management isn't hiding from it, either. They're actively pruning, having reached a "mutual agreement" to exit the D.C. Medicaid market and stating they "expect to exit additional Medicaid markets over the next 12-18 months" where they don't see a path to profit. The company has labeled 2026 as the "trough year for our Medicaid margin." While the market has been understandably focused on this issue, and we have previously examined the Medicaid problem weighing on Elevance Health stock, the critical question is whether this trough creates a floor for the business. By containing the problem and managing it for a gradual recovery, the company is freeing up its other divisions to drive overall growth.

The Path To 12% Growth

This is where the thesis comes together. Management recently raised its full-year 2026 guidance to "at least $27" in adjusted diluted EPS. More importantly, they remain confident in their ability to "return to at least 12% adjusted EPS growth in 2027." That confidence isn't built on a miraculous Medicaid recovery. Instead, it's grounded in the combined strength of the entire enterprise. It's the steady performance in the Commercial business, the improving profitability in Medicare Advantage, and the rise of its Carelon health services arm, which is becoming an "increasingly important durable driver of enterprise growth." The path to double-digit growth is designed to be broad-based and balanced, capable of absorbing the Medicaid pressure. If you'd rather own the broader sector, a healthcare ETF like XLV holds Elevance Health among its positions.

The market has been pricing in the problem. The opportunity is that it may have underpriced the solution. If Elevance can deliver on that 2027 growth target, it will be because its diversified business model worked exactly as intended, proving that the whole is indeed greater than the sum of its troubled parts.

How Do You Spot This Before The Crowd Does?

An opportunity like this only counts once it starts showing up in the numbers, and the first hard place it surfaces is management's guidance. The moment a company can actually see the new revenue coming, it raises its forecast, and a raised forecast that the market is already rewarding is about the cleanest proof a story like this is turning real. Dell Technologies (DELL), Fortinet (FTNT), and GE Vernova (GEV) are flashing exactly that signal right now. Our Guidance Momentum screen tracks every S&P 500 name where a rising forecast is already meeting real price momentum, so you can hunt for the next opportunity like this one while it is still early.

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