Shares of UnitedHealth Group (NYSE: UNH) rose 1.2% to $240 on Monday, though the stock remains down 52% year-to-date.
Despite the steep decline, UBS has reiterated its ‘Buy’ rating and maintained a price target of $330, implying a potential upside of 36.9% from current levels.
Following an investor lunch with UnitedHealth executives, UBS said the company is implementing a “return-to-basics” strategy focused on stabilizing its core operations before resuming aggressive growth. Management is conducting a thorough review across all business segments and slowing expansion to strengthen foundational performance.
UBS expects the benefits segment to recover first. OptumHealth should improve as UnitedHealthcare (UHC) stabilizes, while OptumRx continues to deliver solid results. Though some divisions, such as OptumInsight, may take longer to rebound, management emphasized the need for tighter oversight and more targeted investment.
Additionally, UBS’ bullish view is also rooted in UnitedHealth’s prioritization of AI initiatives and brand/reputation investments as part of a more focused long-term strategy.
Wall Street bullish on Wall Street
While some improvements may take time to materialize, UBS described its outlook as constructive, aligning closely with the broader Wall Street sentiment.
According to TipRanks, 23 Wall Street analysts have a 12-month average price target of $319.86 for UnitedHealth, suggesting a potential upside of 33.55% from the current price. Targets range from a high of $440.00 to a low of $198.00.
Notably, UBS’s bullish stance may help restore investor confidence after a challenging year. Soaring medical costs, a DOJ investigation, and a sharp earnings guidance cut have driven UnitedHealth’s downturn.
In Q2, adjusted EPS dropped 40% year-over-year to $4.08, missing estimates, despite a 12.9% increase in revenue to $111.6 billion, including $87.9 billion in premiums. Medical costs surged 20% to $78.6 billion, pushing the medical care ratio to 89.4% amid worsening trends and reduced Medicare funding.
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