TLDR
- UnitedHealth stock broke above key technical resistance at $315, triggering potential move to $380 by Q1 2026
- Morgan Stanley maintains Overweight rating with $325 price target, citing management confidence in turnaround
- Medicare Advantage margins expected to improve from 2.0-2.5% in 2025 to 2.5-3.0% in 2026
- About 78% of Medicare Advantage members could be in 4-Star or higher plans in 2026, up from 71%
- Wall Street consensus remains Strong Buy with 17 Buy ratings despite stock trading 50% below 52-week high
UnitedHealth Group stock is showing signs of life after a brutal year that saw shares fall 37%. The healthcare giant closed Tuesday at $347.92, still trading about 50% below its 52-week high near $600.
The stock broke through a critical technical level on Tuesday. UnitedHealth pushed above the $315 mark, which represents a bullish inverse head-and-shoulders neckline.
This breakout could trigger a measured move to $380. Technical analysts believe this target could be reached as early as the first quarter of 2026.
The technical picture gets more interesting when you look at the recent price action. UnitedHealth posted a 12% gap-up on August 15, which followed an 11% gap-down back on May 15.
This creates what chartists call an island reversal pattern. The combination of pattern breakouts and bullish price gaps suggests momentum might be shifting in favor of the bulls.
Morgan Stanley Sees Recovery Path
Morgan Stanley analyst Erin Wright remains bullish on UnitedHealth’s prospects. She kept her Overweight rating and $325 price target after recent discussions with management.
Wright came away more confident in the company’s turnaround story. Management showed strong conviction about profit recovery, particularly in Medicare Advantage and Optum Health divisions.
The analyst expects Medicare Advantage margins to climb higher. Pre-tax margins should rise from the current 2.0-2.5% range in 2025 to 2.5-3.0% in 2026.
By 2027, margins could potentially reach the top of the company’s 2-4% target range. Wright believes UnitedHealth can achieve 6-8% pre-tax margins by 2028.
Medicare Changes Support Outlook
UnitedHealth is making some strategic moves that initially look concerning but may actually help profitability. The company plans to exit certain markets, affecting about 600,000 members.
Management expects fewer of these members to stay with the company compared to past years. While this means lower retention rates, Wright sees this as positive.
The exits allow UnitedHealth to focus resources on more profitable plans. This should help margins improve starting in 2026.
The Medicare Star Ratings outlook also provides encouragement. About 78% of Medicare Advantage members could be in 4-Star or higher plans in 2026.
That’s up from 71% this year. Higher star ratings typically translate to better reimbursement rates and improved profitability.
Wright noted this gives the company better visibility on its profit recovery timeline. The improvements in star ratings should support the margin expansion story.
Wall Street maintains a Strong Buy consensus rating on UnitedHealth stock. The rating is based on 17 Buy recommendations, two Holds, and one Sell.
The average price target sits at $322.28, which implies a 7.37% downside from current levels. Wright ranks 274 out of more than 10,018 analysts tracked by TipRanks with a 64% success rate.
UnitedHealth stock has gained 4% over the past three months as the broader market rally spreads beyond technology stocks into healthcare.
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