This Stock Just Crashed. Is it Time to Buy?

A 40% discount on health insurance sounds pretty great.

We’d all be saving thousands of dollars every year!

Unfortunately, I don’t have a 40% discount on health insurance.

But I have the next best thing.

How about a 40% discount on a health insurance stock?

Centene (ticker: CNC) dropped over 40% last Wednesday to prices we haven’t seen since 2017!

Centene is one of the largest providers of government-sponsored health insurance in the United States.

Centene has almost $125 billion in revenue from Medicare and Medicaid, which accounts for almost 80% of its total revenue.

And if you’ve been following the news recently, you’ll understand why Centene is struggling.

Congress just passed a bill to cut Medicaid funding by about $1 trillion over 10 years.

Here’s an article from KFF with more information.

These cuts sound disastrous for Centene, which we’ll get back to in a second.

But what really hurt Centene was company management pulling guidance for the rest of 2025.

Generally, companies issue guidance on what they expect earnings or revenue will be in the future.

When a company lowers guidance, it rings alarm bells for the stock.

But when a company pulls guidance completely, as Centene just did, we’re talking about a five-alarm fire.

Why did Centene pull its guidance?

Centene found growth in some of its markets was much lower than previously thought.

Centene believes lower growth could hurt its EPS by $2.75, which is about a 40% drop from the company’s guidance before it was withdrawn.

However, the market is overreacting.

Let’s do some quick back-of-the-napkin math.

The estimated $2.75 drop in EPS is a lot and would lower 2025 EPS to $4.50.

An EPS of $4.50 gives a price-to-earnings ratio of only 7.5x.

A price-to-earnings ratio of 7.5x would be one of the lowest in the entire S&P 500!

Plus, Centene’s price-to-earnings has averaged around 15x for the last 3 years.

I’m not saying Centene doesn’t have its issues.

But a 50% drop in its price-to-earnings ratio is a major discount for any company, even Centene.

Are you worried about the Medicaid cuts? Good, you should be!

However, the cuts just mean the federal government is spending less on Medicaid.

And the drop sounds scary, but it isn’t as dire as it sounds for Centene.

The cuts to Medicaid funding only account for 15% of the federal government’s spending on Medicaid.

Plus, KFF estimates the federal government only funds 70% of total Medicaid spending.

What does the data mean for Centene?

Total Medicaid spending from the federal and state governments is only expected to drop around 10%.

Of course, do your own research, but Centene is too good to pass up at these prices.

The road will be bumpy, but Centene will be worth the ride.

What other trades are you making right now?