UnitedHealth (UNH.US) shares are heading for their best week in seven months following a larger-than-expected increase in Medicare payment rates, yet the stock's sole remaining bearish analyst is standing by his negative forecast. The majority of this week's over 10% surge occurred on Tuesday. This was triggered by the U.S. government's announcement that it would raise 2027 payments for Medicare Advantage plans by 2.48%, rather than keeping rates essentially flat as initially proposed.
However, in the view of Baird analyst Michael Ha, this is merely a "temporary placebo" that masks other issues. Following the news, he maintained his "underperform" rating on the stock. After HSBC's Siddev Sahu upgraded the stock to "hold" on the same day, Michael Ha became the only analyst with a "sell" or equivalent rating.
Michael Ha stated, "This may alleviate some market concerns about the earnings growth outlook, but we caution investors against rushing to buy at this time. For a company like UnitedHealth, which has significant exposure to value-based care, they are not out of the woods yet."
Analysts broadly view the payment policy finalized by the U.S. Centers for Medicare & Medicaid Services (CMS) as a "reprieve" for health insurers whose profits have been squeezed. For over a decade, Medicare Advantage has been an engine of growth for insurers, but profitability in this business has significantly weakened in recent years due to rising medical costs and reduced government funding.
For the beleaguered UnitedHealth—the nation's largest private Medicare plan provider—this is undoubtedly a shot in the arm. The company recently forecast a revenue decline for 2026, which would be its first annual contraction in over three decades. It also indicated it expects enrollment to shrink across all major business segments, including commercial health plans, Medicare, and Medicaid.
Despite this week's rebound, the health insurance giant's stock is still down approximately 7% year-to-date and has lost more than half its value from the 2024 peak. Nevertheless, Wall Street remains optimistic about a potential recovery for UnitedHealth. Among the 31 analysts tracked by Bloomberg, 22 maintain a "buy" rating, and the average 12-month price target suggests an upside of about 17% from the current share price.
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