KeyBanc Capital Markets has reiterated its Overweight recommendation for UnitedHealth Group (NYSE: UNH) and left its price target at $400, maintaining a bullish stance despite investor anxiety over proposed Medicare Advantage rate changes for 2027.
The shares have reacted sharply to the rate proposal news, with the stock falling roughly 20% while the S&P 500 rose about 0.4%. Market participants have cited the draft Medicare Advantage rate guidance for 2027 as a primary source of uncertainty for future margin normalization and earnings growth at UnitedHealth.
KeyBanc argues the decline overstates the near-term risk and views the stock as materially undervalued. The firm points to a current valuation of approximately 11 times earnings potential, which it says sits about 40% below UnitedHealth’s historical trading ranges. That view is consistent with InvestingPro data referenced by analysts showing a favorable PEG ratio of 0.58, indicating a relatively low P/E compared with near-term expected earnings growth. InvestingPro’s Fair Value assessment also flags UNH as currently undervalued.
Operationally, UnitedHealth provided some reassuring datapoints in its most recent quarter. The company reported a medical loss ratio of 91.5% for the fourth quarter, beating the expectation of 92.1% by 60 basis points. Management’s 2026 guidance was described as aligned with market expectations, and the company has delivered revenue growth of 10.48% over the last twelve months.
KeyBanc’s thesis rests in part on the expectation that final Medicare Advantage rates for 2027 will be adjusted to levels that permit health plans to at least maintain margins, supporting the broker’s continued Overweight rating. Meanwhile, UnitedHealth’s record of shareholder distributions remains intact, with dividend payments sustained for 33 consecutive years and a current dividend yield of 3.13%, which KeyBanc highlights as income potential for investors awaiting price recovery.
Several other sell-side firms have updated their price targets in recent days, reflecting divergent views on how the Medicare Advantage funding conversation will play out. Bernstein SocGen cut its target to $405, citing a slower price-to-earnings recovery and concerns around the long-term outlook for Medicare Advantage funding. UBS trimmed its target to $410 but kept a Buy rating while noting uncertainties over Medicare Advantage rates. Jefferies lowered its target more sharply to $340, pointing to recent market challenges faced by the company.
RBC Capital reduced its target to $361, referencing a "weaker-than-expected" advance rate notice but maintained an Outperform rating. Piper Sandler set a $396 target, noting persistent funding concerns in Medicare Advantage while remaining optimistic about UnitedHealth’s capacity to manage margins. These adjustments underscore ongoing investor concern about UnitedHealth’s performance prospects amid regulatory and market uncertainty.
For now, KeyBanc’s stance signals confidence that valuation and certain operating metrics remain supportive of upside should final Medicare Advantage rates settle at levels that allow margin maintenance for health plans. At the same time, the market reaction highlights the sensitivity of insurer valuations to funding guidance and regulatory developments tied to Medicare Advantage.