UnitedHealth (NYSE:UNH) stock is down another 3% today, adding to a steep decline that’s looking more and more like a falling knife. Over the past month, shares have dropped 26%, wiping out a big chunk of the healthcare giant’s market value and rattling investor confidence.
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Much of the damage can be attributed to the company’s Q2 earnings report, which failed to calm nerves. While UnitedHealth reinstated its full-year outlook, the guidance came in below Wall Street’s expectations, and the sharp rise in healthcare costs only reinforced investor concerns.
Against that backdrop, Baird analyst Michael Ha has taken a bearish turn. Citing mounting operational and financial headwinds, Ha downgraded UNH shares from Neutral to Underperform (i.e., Sell), while slashing his price target from $312 to $198, a move that implies another 19% drop. (To watch Ha’s track record, click here)
Ha’s caution rests on three major concerns. First, the analyst questions the company’s ability to sustain 1% margins in its OptumHealth value-based care (VBC) segment through 2026. The latest risk adjustment model (v28) poses an $11 billion headwind, and efforts to offset it through coding improvements appear unrealistic. That’s a major issue, given that VBC accounts for about 65% of OptumHealth’s revenue.
“We believe offsets thus far through Y2 of v28 have likely been minimal and re-coding efforts are seemingly unrealistic,” the analyst said.
As such, Ha thinks this points to a potential double-digit rate headwind persisting into 2026, with “high execution risk” in implementing the necessary offsets given the scale and fragmentation of the physician network.
“We believe the downside risk associated with UNH possibly failing to execute offsets far outweighs the positive scenario of being able to successfully mitigate and maintain 1% VBC margins in 2026,” the analyst further said.
Second, Ha believes the difficulties extend beyond OptumHealth. After parsing the Q2 call, the analyst now sees margin pressure and heightened risks across other core units like UHC, OptumInsight, and OptumRx. What once looked like a path to broader earnings growth now appears murkier.
Lastly, Ha argues that even under optimistic assumptions, the stock isn’t cheap. His valuation math suggests limited upside at best, and further downside if execution falters.
That said, Ha remains in the minority. While one other analyst shares his bearish stance, the Street as a whole leans positive, with an additional 18 Buys and 3 Holds supporting a Moderate Buy consensus rating. The average price target of $321.76 implies a potential rebound of ~33% from current levels. (See UNH stock analysis)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.