Baird downgrades UnitedHealth shares, cites concerns over Optum Health business

CNBC

31-07-2025

Baird thinks UnitedHealth shares could come under even more pressure in the months ahead. The firm downgraded the name to underperform from neutral and slashed its price target by $114 to $198. That implies more than 25% downside potential from Wednesday's closing level. "Our [risk assessment framework] analysis cast doubt on Optum Health, which was confirmed by 2Q25 earnings with [value-based care] long-term margins lowered to 5% and a total v28 implied headwind close to 20% over three years," analyst Michael Ha wrote in a Wednesday note. "With minimal successful offsets/mitigation through Y2 and re-coding back to pre-v28 levels seemingly unrealistic, we have low conviction on UNH's ability to maintain 1% VBC margins in 2026." Shares have seen some pullback this week, falling more than 5%, after the company's earnings forecast for the full year came in well below analyst estimates on Tuesday. While the company's second-quarter revenue just beat expectations, its earnings for the quarter also missed estimates. That slide puts the stock's six-month and year-to-date decline at about 51% and 47%, respectively, both of which are severely lagging the broader market's more than 5% rise in the last six months and more than 8% gain in 2025. UNH 6M mountain UNH, 6-month In addition to concerns surrounding the company's ability to maintain its VBC margins at 1%, Ha said that other segments of the business, excluding Optum Health, look "more challenged than we anticipated," citing Medicare Advantage, Community Group and HIX, Medicare and Medicaid plans and Optum Insight in particular. "Across UHC/OptumInsight/OptumRx, we saw a visible path forward for strong 2026 margin improvement and earnings contribution," the analyst wrote. "However, following the 2Q earnings call, we now see a more challenging fundamental environment into 2026 with greater than expected headwinds across essentially every UHC line of business: MA, Comm Group/HIX, MDCD (and our growing concerns on MDCD work requirements) and surprisingly lower OptumInsight operating margins when excluding/halting portfolio actions." However, most analysts are still bullish on the name, as 19 out of 28 total analysts covering it have a strong buy or buy rating, according to LSEG data. Its consensus target of roughly $346 also calls for more than 30% upside. Shares were down more than 1% in premarket trading Thursday following the downgrade.