UPDATE: Stifel Upgrades Humana

In a note released Friday morning, Stifel analyst Thomas Carroll upgraded shares of Humana (NYSE: HUM) from Hold to Buy and set a $155 price target.

"We believe investors should own shares ahead of 2Q14 earnings, add more if weak Health Insurance Exchange (HIE) results pressure shares, and manage the position for ~3 years," said Carroll.

In explaining his opinion, Carroll pointed to Humana's history of demonstrating its ability to maneuver the changing rules of Medicare Advantage in a way that maintains an adequate margin. Furthermore, he stressed the importance of this fact due to the growing population of those eligible to apply for Medicare.

Carroll concluded, "We want to own shares now despite the risk of the quarter. Should results and management tone be worse than expected, we want to buy more in the weakness. Our view is that the stocks of government focused MCOs – including MA – will trade at a premium to the group average in coming years."

Shares of Humana closed Thursday at $124.35.