UnitedHealth Group (NYSE: UNH) received a boost on Wednesday, April 1, when Raymond James upgraded the stock from “Market Perform” to “Outperform,” with a $330 price target.
The financial firm expressed belief that UnitedHealth’s expense upside is now above Wall Street expectations. Analyst John Ransom also mentioned improved general and administrative (G&A) efficiency, saying that even modest gains could have a meaningful impact. Specifically, he predicted every 100-basis-point improvement would add roughly $3.80 per share.
At the same time, visibility into Optum Health, a UnitedHealth branch, has improved, as far as margins are concerned. That is, while margins may look flat this year, the underlying trajectory is positive, as the company exits underperforming operations and streamlines its network.
Operational changes will drive UNH shares
According to Ransom, internal actions are already reinforcing a positive trend. Notably, the company has closed or divested several unprofitable clinics entirely, which has helped relieve margin pressure.
Moreover, the management is also working on boosting profitability in its roughly $58 billion risk-based revenue segment, where margins remain below 1%.
At the same time, further upside is evident in Optum’s $33 billion non-capitation business, which, although currently generating only single-digit margins, still has plenty of room for improvement with better execution.
UnitedHealth stock price target: Is UNH a buy now?
On Wall Street, UNH currently holds a “Strong Buy” consensus rating, based on seventeen “Buy” recommendations, three “Holds,” and no “Sells” over the past three months, judging by the statistics Finbold retrieved from TipRanks on April 1.
UNH stock price target. Source: TipRanks
The average UnitedHealth stock price target for the next year sits at $366.47, suggesting a roughly 35.4% upside potential. On the most bullish extreme, analysts see UNH trading at $440, while on the bearish end, they see it at $311 in the same period.
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