agilon (AGL): Upgrading to Outperform on progress in turnaround; increasing PT to $125

We are upgrading AGL to Outperform and raising our target price to $125 (vs $86 earlier). Agilon has been instituting a turnaround focused on risk taking discipline, coupled with incremental medical cost management improvements. AGL has prioritized profitability over growth by repricing contracts, reducing risk exposure, and controlling operating costs. The company has reduced MA membership from 527k to 426k and cut Part D exposure from 70% of its book in 2024 to 15%, contributing to significantly lower MLR. Our updated model projects Adj EBITDA of $79m in 26, $124m in 27 and $160m in 28, with 2026 adj EBITDA increasing from $25.2m previously, and we now expect AGL to reach EPS positivity in 2028 (vs 2030 previously). Our price target increase is driven by improved EBITDA as YTD MA margin is currently 500bps above our prior expectation. We continue to use a DCF valuation with a WACC of 18.6% and terminal FCF growth rate of 2% (both unchanged), while seeing EV/EBITDA (12.5-15x) and EV/R