UnitedHealth Group (UNH) stock rallied about 12% on Friday, as Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) and other hedge funds, including David Tepper’s Appaloosa Management, revealed their stakes in the troubled health insurer. Even after Friday’s rally, UNH stock is down 40% year-to-date, making it the worst performer in the Dow Jones Industrial Average (DJIA). Dismal earnings, rising healthcare costs, an abrupt CEO change, and a Department of Justice (DOJ) investigation into its business practices have dragged down UNH stock. Wall Street is cautiously optimistic on UnitedHealth stock amid ongoing challenges, with the average price target indicating a modest upside potential from current levels.
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Analysts’ Views on UNH Stock
In reaction to the stakes disclosed by hedge funds, Bank of America Securities analyst Kevin Fischbeck increased the price target for UnitedHealth Group stock to $325 from $290, but reaffirmed a Hold rating. While the 4-star analyst views Berkshire Hathaway’s stake in UNH as a positive sign, he contends that it “really only reaffirms the widely held view held by many investors that UNH’s (and most MCO’s [managed care organization]) earnings are depressed, and if you can take a 5-year view, you likely will do well.”
However, Fischbeck believes that only a few investors have that long an investment horizon, and those who do would desire positive returns every year over this time period. The analyst thinks that the debate is more about when the upside will be realized rather than if there is an upside. While Fischbeck sees upside potential in 2027, he currently has a neutral stance on UNH stock as he awaits more clarity. The analyst explained that his revised price target reflects improved peer multiples (17.1x versus the previous multiple of 15.3x).
Meanwhile, several analysts slashed their price targets for UNH stock following the dismal Q2 earnings report, but maintained a bullish stance to reflect confidence in the company’s long-term growth potential.
For instance, Bernstein analyst Lance Wilkes lowered the price target for UnitedHealth stock to $337 from $377, while reiterating a Buy rating. The analyst stated that he updated his earnings per share (EPS) model and slashed his price target to reflect the new lower earnings power base in 2025 and earnings growth from sector and company turnaround. Wilkes added that UNH’s new CEO is in the middle of an initial turnaround phase, and he is optimistic about the initiatives taken so far. In particular, Wilkes noted talent changes, including a new head of the Optum unit and a new CFO, and the initial resetting of the underwriting culture.
Is UNH Stock a Buy, Sell, or Hold?
With 18 Buys, two Holds, and two Sells, Wall Street has a Moderate Buy consensus rating on UnitedHealth Group stock. The average UNH stock price target of $314.55 indicates a modest upside potential of 3.5% from current levels.
