Why UnitedHealth Stock Popped on Wednesday
Key Points
An analyst raised his price target on the health insurer by 14%.
He also kept his buy recommendation intact.
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An analyst's price target increase for UnitedHealth Group (NYSE: UNH) stock was taken to heart by investors on Wednesday. Following news of the boost, they collectively pushed the large health insurer's stock up by almost 5% that trading session.
14% more optimistic
The person behind the raise was Wolfe Research prognosticator Justin Lake. Well before market open that day, he upped his price target on UnitedHealth to $375 per share from his previous $330. He maintained his outperform (i.e., buy) recommendation as he did so.
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According to reports, the analyst is bullish on the future of both the company's foundational UnitedHealthcare insurance operations and its Optum healthcare services and tech unit.
He believes that UnitedHealthcare will be able to improve its margins to meet management's target levels. Meanwhile, Optum has good potential to post meaningful growth going forward.
Looks like a buy on weakness
Collectively, analysts are modeling improvements on both the top and bottom lines for UnitedHealth's 2026. Their consensus for revenue growth that year is 2% (to just over $457 billion), while that for per-share earnings is an encouraging 9% (to $17.71).
Lake's rosy take on the stock aside, UnitedHealth hasn't been a popular stock lately. It's facing numerous challenges these days. To name two significant ones, it's coping with a surge in costs related to its Medicare Advantage business, and Affordable Care Act (i.e., Obamacare) subsidies are weeks away from expiration.
That said, the company remains a powerhouse in its sector, and I believe these problems are surmountable. Given that, I'd consider buying its stock at the current weakened price.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
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