UnitedHealth’s Margin Challenges and Strategic Focus Lead to Hold Rating

Joanna Gajuk, an analyst from Bank of America Securities, reiterated the Hold rating on UnitedHealth (UNH – Research Report). The associated price target remains the same with $350.00.

Joanna Gajuk’s rating is based on a combination of factors, primarily revolving around UnitedHealth’s current financial outlook and strategic decisions. The company’s Medicare Advantage business is expected to face margin pressures, with projections of 0% margin in 2025, improving to 2% by 2027, which is still below the long-term target of 3-5%. This cautious outlook is reflected in the lowered EPS estimate for 2025, which is significantly below consensus.
Additionally, UnitedHealth’s strategy appears to be focused on protecting margins rather than expanding market share, as evidenced by their conservative bidding approach for Medicare Advantage. The new CEO is anticipated to provide conservative guidance, potentially allowing for positive surprises in earnings. However, the trajectory to return to target margins remains uncertain, particularly with the ongoing high-cost trends and regulatory changes. These factors contribute to the Hold rating as the market awaits clearer visibility into the company’s ability to achieve its margin targets.

In another report released on June 2, TD Cowen also reiterated a Hold rating on the stock with a $308.00 price target.