The current year has been full of developments for UnitedHealth Group (NYSE:UNH), and not always the good kind. The company saw its share price start to drop precipitously beginning in mid-April, as a disappointing earnings report, pulled guidance, and a leadership change at the top jolted UNH.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The losses continued through the summer months, as regulatory uncertainty and reports that the U.S. Department of Justice was looking into the company’s billing practices weighed on sentiment. Increased medical costs – that hit both UNH as well as its peers in the healthcare industry – also contributed to the falling share price.
Over the past few weeks, however, UNH has recovered a bit – and it has gained some 30% during the month of August. Long-term investors are banking on the healthcare giant’s ability to continue clawing back these losses. This includes none other than Warren Buffett, whose Berkshire Hathaway bought 5 million shares.
Has the trajectory of UNH shifted for the better? Top investor Dair Sansyzbayev certainly thinks so.
“UnitedHealth looks like a no-brainer ‘Strong Buy’ to me because it is a vastly undervalued flagship health care company of the United States,” emphasizes the 5-star investor, who is among the top 3% of TipRanks’ stock pros.
Sansyzbayev notes that the U.S. population is both increasing and growing older, meaning that UNH’s addressable market will be undergoing a fairly large expansion in the years ahead.
While the company’s costs have increased this year, the investor doesn’t see reason for undue alarm. Much of these enhanced costs are due to higher rates of medical utilization, points out Sansyzbayev, as many patients are returning for care that they had put off during the pandemic.
“The spike is temporary,” predicts the investor, who expects “a quite rapid recovery of the company’s EPS after the expected FY2025 nosedive.”
Sansyzbayev further details that the company has a healthy balance sheet, sitting on $32 billion in cash, along with a solid business mix that is “well-diversified.”
The investor acknowledges that further Medicare or Medicaid budget cuts (the OBBB included over $1 trillion in cuts for Medicaid funding) are a wildcard, though not one that he finds particularly worrisome.
“All in all, UNH is a ‘Strong Buy.’ Secular trends are favorable, while it is highly likely that all the risks and uncertainties regarding Medicare and Medicaid funding are already priced in,” concludes Sansyzbayev. (To watch Dair Sansyzbayev’s track record, click here)
That’s where most of Wall Street finds itself as well. With 17 Buys accompanied by 2 Holds and 1 Sell, UNH enjoys a Strong Buy consensus rating. The recent recovery has occurred a bit faster than many analysts would have predicted, however, as UNH’s 12-month average price target of $314.95 implies only minimal movement in the year ahead. (See UNH stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.