HSBC Downgrades UnitedHealth Group’s Rating

On Wednesday, HSBC lowered its rating for UnitedHealth Group Inc. (NYSE: UNH) from “hold” to “reduce,” slashing the price target by approximately 45% to $270. This decision follows the company’s recent leadership changes and the withdrawal of its 2025 financial guidance earlier in May. As a result, UnitedHealth’s shares fell over 1% during pre-market trading in the U.S., contributing to a 40% decline for the year.

In its assessment, UnitedHealth pointed to a significant increase in healthcare costs, especially due to new beneficiaries enrolling in the government-supported Medicare Advantage Plan. This spike in costs led to the suspension of their full-year financial forecasts. It seems that care activities have expanded and diversified significantly since the end of the first quarter of 2025.

HSBC analysts, led by Sidharth Sahoo, noted that the heightened risk associated with estimated adjusted EPS for 2025 could create “opportunities for kitchen sinking” for the incoming CEOs. However, they also predict that the company might bounce back in the long run, with expectations of returning to growth by 2026 and targeting a high single-digit EPS growth rate for fiscal year 2027.

UnitedHealth Group Inc. operates a comprehensive healthcare system across four segments: UnitedHealthCare, Optum Health, Optum Insight, and Optum RX. While there’s recognition of UNH’s growth prospects, it appears some analysts are leaning toward the potential of certain AI stocks which may offer better returns with less risk. There’s a notion that these alternatives could yield substantial upside compared to UnitedHealth.