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CIBC is out with an interesting upgrade on WellCare Health Plans (NYSE:WCG), upping their rating to Sector Outperformer from Sector Performer with a tgt of $60. According to the firm, this is based on the WellCare search warrant that they have obtained from the U.S. District Court in Tampa.

In CIBC's view, the warrant appears to be fairly specific in nature, and focused primarily on WellCare's Medicaid business in Florida, particularly its behavioral health operation. There is little mention of the company's Medicare business, or its PDP operation. It doesn't appear that the agents disturbed the office of Adam Miller, the Chief Operating Office of WellCare's Prescription Drug Plans. This would seem unusual if the government were mounting a large investigation into the Medicare PDP product.

It's possible that the Florida Medicaid investigation spreads into other areas, but the document seems to rule out widespread, systemic fraud, increasing the likelihood that WellCare settles, pays a fine, but remains in all its businesses, rather than being put out of business.

The investigation will be drawn out, there will be more negative headlines to come, and it will be many quarters before WellCare files financial reports with the SEC, but the more limited scope of the investigation suggests that WellCare's business is worth far more than $35 per share.

Notablecalls: I like this out-of-consensus call from CIBC. They were out with some supportive comments yesterday morning but were hesitant to become more positive. Now that they got the search warrant from Tampa, things have become somewhat more clear. That's an edge. Other firms didn't make the effort to get the docs.

While government investigations definitely can spread quickly into other areas, the feds usually tend to hit with all they have in this phase. If this is all they have, WCG is going back to $50-55 in a jiffy (next couple of months).

Looking at this call from CIBC's Carl McDonald, my gut tells me WCG will hit $40 soon. Maybe even this week.