Morgan Stanley: 4 Reasons To Consider UnitedHealth

UnitedHealth Group Inc UNH trades at a two-times price-to-earnings discount to the S&P and underperforms the health sector by 150 basis points.

One analyst said it’s time to buy.

The Rating

Morgan Stanley analyst Zack Sopcak reiterated a Buy rating on UnitedHealth and assigned a $275 price target.

The Thesis

Sopcak detailed four reasons for Morgan Stanley's bullish stance in a note: 

• As the industry consolidates, drawing regulatory eyes toward top players, UnitedHealth appears a stable name in managed care. Its $200-billion market cap is seen to insulate it from the changing competitive environment and protect earnings growth in the teens that's expected through 2025.
• UnitedHealth has long proven its commitment to the now-trending vertically integrated health care model through its MedExpress and in-house pharmacy benefits manager operations, partnership with Walgreens Boots Alliance Inc WBA, and acquisitions of Catamaran and DaVita Medical Group.
• The company has the potential to expand globally, and its OptumInsight, a “key differentiator,” offers “a technology driven link to value-based care not just [to] UHC, but competitive health plans and providers, creating a feedback mechanism that gives UNH/Optum a continuous advantage that is difficult to replicate." 
• Finally, the discounted stock is attractively valued considering UnitedHealth’s expected growth. “Potentially greater cloudiness in managed care valuation visibility due to multiple deals and regulatory approval paths emphasizes the value for the high quality growth in an attractive industry that UNH provides,” Sopcak said.

Price Action

UnitedHealth shares were up more than 2 percent after the open Tuesday. 

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