Is the Medibank share price a buy following the ASX 200 insurer's latest update?

Does Medibank's update make it a buy or not?

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The Medibank Private Ltd (ASX: MP1) share price is edging lower on Tuesday.

In afternoon trade, the private health insurer's shares are down slightly to $3.50.

What's going on with the Medibank share price?

The Medibank share price is edging lower today after investors gave a lukewarm response to the company's market update.

According to the release, industry growth remains strong with a continuation of factors supporting participation.

However, Medibank has only reported financial year to date private health insurance policyholder growth of 0.4k policyholders or 0.02% as of 31 March. This compares to its previous guidance of 0.5% to 0.75% growth in FY 2023. Though, it does expect a strong fourth quarter and positive momentum leading into FY 2024.

The company also expects to announce a further customer give back before the end of the quarter, which is great for policyholders but perhaps not for its bottom line and dividends.

In addition, the company advised that it no longer expects its non-resident business gross profit "to be higher" than the first half, where it reported growth of 106.7%. It now expects gross profit to be "approximately double from FY22."

Should you buy shares?

While the broker community hasn't had chance to respond to this latest update, as things stand, they aren't urging investors to buy the company's shares.

For example, the likes of Citi, Macquarie, Morgan Stanley, and Morgans all have the equivalent of hold ratings and price targets a touch lower than where the Medibank share price currently trades.

Citi explained why it is sitting on the fence with this one:

Medibank's return to policyholder growth in February and its confidence that the initial cybercrime impacts on its business have started to subside suggest that the previous allowance we had in our forecasts for continued p/h losses over the next 18 months is too conservative. So, we adjust our growth forecasts accordingly.

There will, however, likely be ongoing cyberattack impacts suggesting the stock is still not without risk. These include potential class actions, etc. Our EPS changes which also allow for higher investment yields are FY23E: +7%; FY24E: +11%; FY25E: +13%. We retain our Neutral call lifting our TP to A$3.45, with this now set at a ~5% (was ~8%) discount to our valuation to account for the continued, but lower, cyberattack risk.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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