There Is A 25% Increase In Analysts' Expectations For This Health Insurance Giant's Stock

According to Raymond James, UnitedHealth shares have a good chance of having a strong year in 2023. 

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As a result of the analyst's upgrade, UnitedHealth's shares have been upgraded from outperform to strong buy. Additionally, he raised the price target from $615 to $630, which implies a 27.7% increase from Tuesday's closing price, which puts the price at $630. 

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Despite the Dow Jones Industrial Average component exhibiting underperformance year-to-date, the analyst said he is more optimistic about its performance in the coming months. In 2023, UnitedHealth shares are down 7%, compared to the 6.8% gain recorded by the S&P 500 in that time frame. In a nutshell, we believe that the 'set-up' has significantly improved as a result of the valuation reset in conjunction with an improved regulatory environment.

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Despite Ransom's previous downgrade in December, he believes many of UnitedHealth's policy overhangs, which were the reason for his previous downgrade, have now passed UnitedHealth. 

There are more improvements included in the final notice concerning Medicare Advantage payments than UnitedHealth previously stated would create headwinds for its Optum Health division in the next few years, and a three-year transition time frame has been allowed for health care companies to phase in changes.

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There is some agreement among analysts at Raymond James that these measures are a positive one for the industry, as they buffer the initial impact and buy time for behavior changes to occur over time. “We believe the final rate announcement for Medicare Advantage providers will clear the air for the MA providers,” Ransom stated.

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A significant decline in the company's price-to-earnings multiple has also been noted by the analyst, as the multiple has declined dramatically. 

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"We believe the stocks are likely to be well de-risked at these current levels and offer attractive entries for defensive stocks with earnings growth algorithms generating double-digit growth over the next several years," he concluded.

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