Morgan Stanley asks: Is UNH "the CVS of 2026"?

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Investing.com -- Morgan Stanley is asking whether Unitedhealth Group (NYSE:UNH) could become “the CVS of 2026,” arguing that recent actions suggest a clear intention toward margin repair even at the expense of membership growth.
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UnitedHealth has moved aggressively to reprice and reduce benefit richness after two years of elevated utilization and the phased-in v28 risk model pressured profitability.
The company is cutting benefits across the board in order to stabilize economics and is targeting roughly 1 million fewer Medicare Advantage members in 2026, with the potential for even greater contraction based on its proprietary benefit analysis.
This approach “mirrors CVS’s (NYSE:CVS) playbook beginning in ’25 AEP (Annual Enrollment Period); prioritizing profitability over growth,” Morgan Stanley said, a strategy the firm views favorably.
The bank expects Medicare Advantage margins at UnitedHealth to recover to around 2%–3% in 2026, compared with the company’s longer-term target range of 2%–4%.
It added that its outlook for Medicare Advantage as a category has improved, citing what it sees as a more favorable rate notice and a potentially easing regulatory backdrop, factors that could support margin recovery for category leaders.
A key part of the debate, Morgan Stanley said, is whether the market has already priced in most of the improvement.
While investors broadly understand the margin recovery path laid out by management, they may be underestimating the magnitude of benefit cuts embedded in UnitedHealth’s 2026 offerings, the Wall Street firm noted.
“With the stock up 38% from a low in August this year, some investors argue that there is still a lot to prove for its turnaround story to play out.”
The impact of these decisions is unlikely to be fully visible until AEP results are released with Centers for Medicare & Medicaid Services (CMS) data in February.
Morgan Stanley highlighted that UnitedHealth’s benefit reductions exceeded national averages across several products, including particularly deep cuts in Medicare Advantage PPO plans, aligning with management’s stated intent to reduce exposure to less profitable segments.
It also pointed to increases in maximum out-of-pocket limits and higher cost-sharing for Medicare-covered services as important components of the strategy.