Following an investment by Warren Buffett’s Berkshire Hathaway, many eyes are on the healthcare insurer these days.
What the stock analysis community giveth, it can also taketh away.
That was the dynamic behind the slide of UnitedHealth Group (UNH -1.53%) stock on Tuesday. As in the previous trading session, the big insurer was affected by an analyst’s price target move. This time, however, this took the form of a cut rather than a raise. UnitedHealth closed the day down by 1.5% in value, a worse showing than the S&P 500‘s (^GSPC -0.59%) 0.6% decrease.
A chop from a bull
The analyst behind the slice was Lance Wilkes from Bernstein SocGen Group. Well before the market open Tuesday, Wilkes took a powerful weed whacker to his UnitedHealth fair value assessment, reducing it to $377 per share; formerly, he believed it was worth as much as $594. Despite the rather drastic adjustment, he maintained his recommendation of outperform (buy, in other words).
Image source: Getty Images.
According to reports, Wilkes wrote in his UnitedHealth update that he expects the company’s performance to remain weak through this year, and has commensurately reduced his earnings estimate and target P/E. For the former, he cut his per-share profitability for full-year 2026 by 13%, and for the latter to 12.5 from the preceding 18.
The analyst also cited sluggish growth in the insurer’s key OptumHealth unit as a reason for his price target cut.
Warren likes it
UnitedHealth has landed on many an investor’s radar following news last week that Berkshire Hathaway had plonked down $1.6 billion for a stake in the company. Anytime Warren Buffett’s investment vehicle buys (or sells, for that matter) a pack of stock for its equity portfolio, the target company becomes a lightning rod for investors.
Buffett and Berkshire surely see a company that has potential to reach. Others might consider it something of a clunky underperformer that’s fairly — or even overly — valued these days.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
