Goldman Sachs Adds UnitedHealth to Conviction List, Sees Medicare Cycle Bottoming
Goldman Sachs has added UnitedHealth Group (NYSE: UNH) to its U.S. Conviction List as part of its monthly portfolio update, signaling growing conviction that the healthcare heavyweight is approaching a cyclical bottom in its Medicare Advantage underwriting business. The bank reiterated a Buy rating and a $435 price target, suggesting roughly 20% upside from current levels.
Medicare Advantage, which accounts for about 40% of UnitedHealth's total revenue, has been under pressure from elevated medical cost trends and regulatory headwinds. But Goldman analysts argue the worst may be behind the company. “We believe UnitedHealth is nearing the trough of its underwriting cycle,” the firm wrote in a note to clients. “That sets up a more favorable earnings trajectory heading into 2025.”
The move comes just days after Raymond James analyst John Ransom lifted his price target on UNH to $370 from $330, maintaining an Outperform rating. Ransom pointed to a strong first-quarter earnings beat—adjusted EBIT came in $790 million above consensus, with a core underlying beat of roughly $1.19 billion. That translated to about $1.05 in earnings per share upside after adjustments. Still, he cautioned that management appeared to absorb much of the upside through higher costs, and the forward guidance remains conservative.
“The market may be waiting for a cleaner baseline before piling in,” Ransom said. “But the trajectory is clearly improving, and the multiple has already re-rated from recent lows.”
UnitedHealth operates through four main segments: Optum Health, Optum Insight, Optum Rx, and UnitedHealthcare, the latter covering employer-sponsored plans, Medicare & Retirement, and Community & State programs. The breadth of its operations gives it a defensive edge even when one segment faces headwinds.
Not everyone is convinced the rally has legs. Mark Delaney, a retail investor from Ohio, said he sold his UNH shares after the Goldman announcement. “Every time a big bank puts a stock on a 'conviction list,' it feels like the top is near,” he said. “I’d rather lock in gains now than chase a price target that might take two years to hit.”
Sarah Chen, a portfolio manager at a mid-sized wealth firm in Chicago, took a more measured view. “UnitedHealth is a high-quality name, but the valuation is no longer cheap. The $435 target implies solid upside, but you’re paying for a recovery that hasn’t fully materialized yet. I’d wait for a better entry.”
Tom Rivas, a former healthcare analyst turned independent trader, was blunt: “Goldman is late to the party. UNH already ran 15% off the lows. If they were really convicted, they’d have added it three months ago. This feels like window dressing for their list.”
UnitedHealth shares have climbed roughly 12% year-to-date, outpacing the broader healthcare sector. While the company’s long-term fundamentals remain intact, near-term uncertainty around Medicare reimbursement rates and utilization trends continues to give some investors pause.
For those looking beyond healthcare, the current market environment also presents opportunities in select AI stocks that could benefit from tariff-driven onshoring and domestic manufacturing incentives. But for now, UnitedHealth remains a bellwether for the managed care space—and Goldman’s latest move suggests the firm sees a turning point ahead.