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On Monday, TD Cowen analysts revised their stance on UnitedHealth Group (NYSE:UNH), downgrading the stock from "Buy" to "Hold" and significantly reducing the price target to $308 from the previous $520. The adjustment follows an analysis of the company’s Risk Adjustment Factor (RAF) scores and potential impacts from upcoming industry changes. The stock, which has declined 42% year-to-date, currently trades at a P/E ratio of 12.2. According to InvestingPro, 19 analysts have recently revised their earnings expectations downward for the upcoming period.
UnitedHealth Group’s current coding practices, which are above the industry average, are highlighted as a concern by TD Cowen. The report specifically points out that UnitedHealth is coding higher than Humana (NYSE:HUM) and other competitors, which could lead to a material impact in 2025 due to version 28 (v28) of RAF scores. According to the analysis, this coding advantage may be fundamentally impaired, affecting UnitedHealth’s historical competitive edge. Despite these concerns, InvestingPro analysis indicates the stock is currently undervalued, with strong fundamentals including sufficient cash flows to cover interest payments and a Financial Health score rated as "GOOD."
The firm anticipates that 2026 will present additional challenges for UnitedHealth in achieving target margins within its UnitedHealthcare and Optum Health segments. The expected changes in Medicare Advantage (MA) care activity and possible accelerations in Commercial and Medicaid sectors are also contributing factors to the revised outlook.
Adding to the uncertainty around UnitedHealth’s future, TD Cowen references a Wall Street Journal article that mentions a potential criminal investigation into the company. While UnitedHealth has responded stating they have not been notified of any investigation by the Department of Justice (DOJ), the news has introduced an element of unpredictability that TD Cowen believes investors should consider.
The downgrade and price target reduction reflect TD Cowen’s assessment of the risks and challenges facing UnitedHealth Group as it navigates industry changes and potential legal scrutiny. With analyst targets ranging from $350 to $626, investors seeking deeper insights can access comprehensive valuation analysis and 15 additional ProTips through InvestingPro’s detailed research reports.
In other recent news, UnitedHealth Group has been the subject of several significant developments. Notably, Raymond (NSE:RYMD) James has revised its earnings per share (EPS) estimates for UnitedHealth, lowering the 2025 EPS to $20 from $22 and the 2026 EPS to $23 from $25. This adjustment was made after excluding $4 billion in one-time gains from 2024, which were attributed to strategic activities and investment income. Meanwhile, RBC Capital Markets has reduced its price target for UnitedHealth to $355 from $525, citing revised EPS estimates and valuation concerns amidst increased Department of Justice (DOJ) activity. Despite this, RBC maintains an Outperform rating, expressing confidence in the company’s long-term potential.
Additionally, Wolfe Research has maintained its $501 price target and Outperform rating on UnitedHealth, even as the company faces a DOJ investigation into its Medicare Advantage billing practices. The investigation, which has been ongoing since last summer, focuses on the company’s Optum unit’s coding practices. JPMorgan also adjusted its price target for UnitedHealth to $405 from $525, maintaining an Overweight rating. The revision reflects recent leadership changes and the suspension of 2025 guidance, with future earnings estimates factoring in increased care activity and a higher medical loss ratio. Despite these challenges, JPMorgan anticipates a path to low double-digit EPS growth by 2026, supported by improvements in Medicare Advantage and Medicaid rates.
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