UnitedHealth Group (UNH) PT Lowered to $405 at JPMorgan, Stays Overweight, ' some of the uncertainty around cost trend should subside.'

JPMorgan analyst Lisa Gill lowered the price target on UnitedHealth Group (NYSE: UNH) to $405.00 (from $525.00) while maintaining a Overweight rating.

The analyst comments "

Following UNH leadership change and suspension of 2025 guidance (see our takeaways here), we are updating our estimates. For a discussion of recent events and our estimate changes, see slides attached. Our 2025 adj. EPS estimate of $22.26 reflects an estimated MLR of 88.6% given the elevated care activity that has worsened in the last month. Looking to 2026e, we assume ~10% y/y adj. EPS growth ($24.58), as we look for progress towards mitigating some of the aforementioned headwinds and UHC returning its MA book towards target margins (which we believe will be driven by prioritizing margins over growth in 2026 bids). We believe UNH has the ability to work on some of the factors that have driven the downward revision, particularly in OptumHealth over the course of 2025/2026, and with the better-than-anticipated MA 2026 rates and continued improvement in Medicaid rates, we believe there is still a path to +LDD% adj. EPS growth (with an upside skew if UNH makes faster progress on its improvement initiatives). This +10% y/y improvement in 2026 is below UNH’s long-term target growth of +13% to +16%, however we continue to believe that is an appropriate range; given the near-term headwinds, we take a more conservative approach to growth in 2026 (acknowledging there is potentially upside to our estimate). We reduce our December 2025 price target to $405, which is based on a 16.5x P/E multiple applied to our 2026e adj. EPS of $24.58 (~10% y/y growth vs our 2025e estimate). We appreciate that 16.5x reflects a premium to UNH’s current valuation; however, we continue to believe that UNH’s unique scale and offering warrant a premium to the broader MCO group and we believe that as the company progresses through 2025/2026 some of the uncertainty around cost trend should subside. We would also note reporting by the Wall Street Journal that UNH is reportedly under criminal investigation around its Medicare Advantage book. This is an evolving area to watch over time and while it is unclear exactly what UNH is being investigated for we point to the March Special Master’s report on a long-running DOJ case, United States ex rel. Poehling v. UnitedHealth Grp., Inc.. In that report, the Special Master concluded that the U.S. Government did not prove that UNH violated FCA by knowingly and improperly retaining overpayments received as a result of the ~1.97M unsupported diagnosis codes. Notably, the report highlighted that the DOJ did not conduct any medical records reviews to validate the claim that codes were improper, which bears emphasis as it indicates a significant threshold in these cases for proving MCOs violated the FCA with respect to MA coding. We are not lawyers, and while this is independent from the reporting done by the Wall Street Journal, we think that it bears remembering as we receive new information. While much has changed since last summer, we also highlight our UNH Week notes from last year with background into UNH’s different segments.'

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