JP Morgan on $UNH
Investment Thesis
UNH occupies a unique position within the U.S. healthcare delivery system, not only as a dominant payor of scale (in commercial, Medicare, and Medicaid markets), but also as a large and growing presence in local care delivery (physicians and ambulatory via OptumHealth), scale in pharmacy benefits management (OptumRx), and a fast-growing HCIT/consulting/ RCM business leveraging its own data warehouse (Optuminsight).
Despite its large size, we believe UNH can deliver double-digit earnings growth while returning capital to shareholders over the next three to five years.
Perhaps more importantly, we believe the movement under way to shift the U.S. healthcare reimbursement model away from fee-for-service will disproportionately benefit payors over providers.
Valuation
We are establishing a December 2026 price target of $418, which is based on a 16.5x P/E multiple (unchanged versus our previous December 2025 price target) applied to our 2027e adj. EPS of $25.35.
We appreciate that 16.5x reflects a premium to UNH's current valuation; however, we continue to believe that UNH's unique scale and offering warrant a premium to the broader MCO group and we believe that as the company progresses through 2025/2026 some of the uncertainty around cost trend should subside.
We believe over time UNH should trade at a premium due to attractive top- and bottom-line growth profiles, along with reduced variability of its earnings vs. the SPX.
