Cantor Fitzgerald analyst Sarah James sees the current weakness in health insurance stocks as a prime buying opportunity, driven by a dislocation in Medicare Advantage pricing.
“I think this is another great opportunity to buy,” James said during a CNBC interview, noting that Medicare Advantage pricing resets annually and the current sell-off is creating mispriced stocks across the sector.
The backdrop of the weakness stems from insufficient rates to cover costs for seniors over several years, she added. Expectations were that 2027 would bring alignment and improvement, but instead the Centers for Medicare and Medicaid Services moved in the opposite direction, introducing new headwinds that James described as “debatable at best” in their accuracy.
James argued that the stock market is “not allocating correctly” in response to the Medicare Advantage challenges. While companies heavily exposed to Medicare Advantage, like Humana (HUM) face legitimate headwinds—earning a “hold” rating from James—diversified insurers with strong pricing discipline are being unfairly punished.
James maintains “buy” ratings on both UnitedHealth Group (UNH) and CVS (CVS), which she believes shouldn’t be dragged down with the broader group.
On UnitedHealth specifically, James expressed confidence following the company’s recent earnings report. She praised the returning, experienced management team for setting conservative guidance that enables continued “beat and raises,” noting that medical costs appear relatively under control. Her price target sits more than 30% above current levels, making it attractive for both short-term and long-term investors.
Despite regulatory headwinds as the administration increases its focus on payers—including debates over coding accuracy and potential fraud concerns—James sees a favorable long-term outlook.
She noted that post-elections, the political environment is likely heading toward gridlock, which is “usually where the payers thrive when there’s less regulatory change.”
This makes the current moment a potentially advantageous time to revisit these names.