UBS thinks UnitedHealth is an essential portfolio holding trading at a discount. The firm upgraded shares of the health-care giant to buy from neutral and raised its target price to $640 from $520. UBS’ forecast implies roughly 19% upside from Friday’s $539.40 close. Analyst A.J. Rice labeled the stock as “a core holding available at a reasonable price,” and said headwinds from earlier in the year that pressured the stock, including worry over elevated medical costs for seniors, have largely subsided . “We believe that the strong Q3 release from UNH is a clearing event that should pave the way for improved valuation for the stock,” Rice said. The analyst noted the stock trades at 16 times its 2025 earnings per share estimate — that’s below its average five- and 10-year PE of 19 times and 18 times earnings, respectively, they said. The company posted a third-quarter beat on the top and bottom line Friday, driven in part by sharp growth in its Optum business. Shares popped more than 2% following the results. On Monday, the stock rose slightly before the bell. Rice added that Medicare Advantage programs will remain an essential driver for UnitedHealth, as enrollment growth is already trending near 10% for the year, he said. “The company is undertaking various cost cutting initiatives to ensure the business is well positioned to handle growth going forward,” he said. “Also in light of the tougher [Medicare Advantage] rate environment for 2024, these cost and investment actions in Optum Health should provide some mitigation against rate pressures.” UnitedHealth stock has ticked up nearly 2% in 2023. UNH YTD mountain UNH in 2023 UNH YTD mountain UnitedHealth stock. — CNBC’s Michael Bloom contributed to this report.
