Investing.com -- Raymond James has added UnitedHealth Group (NYSE:UNH) to its list of current favorite stocks, citing improving fundamentals and an attractive valuation.
The firm said in a note Thursday that the stock, which has underperformed the S&P 500, is now trading at a significant discount to the market, around 22% or 4.8 times below its historical averages.
"We are adding UnitedHealth Group as our current favorite following the stock's significant underperformance versus the S&P 500," Raymond (NS:RYMD) James analysts stated, highlighting the stock's historically attractive valuation level.
The analysts expressed confidence in UnitedHealth's potential for a turnaround in 2025, driven by better fundamentals and expected positive headlines.
They believe the company's Medicare Advantage (MA) program could be a catalyst, with an advanced rate notice anticipated in late January. While the Trump administration's policies on MA remain uncertain, analysts believe it is "very unlikely to be more hostile than his predecessor's."
The firm adds that another factor supporting the firm's bullish outlook is UnitedHealth's conservative forecast for 2025, particularly regarding medical loss ratio (MLR) assumptions, which have been increased by 150 basis points compared to FY24 guidance.
"The company typically outperforms its initial guidance ranges by ~4% on average, excluding last year, which had unusual circumstances (MLR pressure/CHNG cyberattack)," said Raymond James.
The firm sees easing year-over-year comparisons and market anticipation of 2026 growth as potential tailwinds for the stock.
"We think the stock is poised for a gathering strength through the year," the analysts concluded.