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Healthcare Stocks Hit Valuation Bottom, 3 Names to Rebound
Written by Gabriel Osorio-Mazilli
Key Points
- The healthcare sector has fallen into a deeply discounted valuation, creating attractive entry points for investors seeking value and upside in the next few months.
- Regarding discount levels and Wall Street analyst sentiment, three names stand out: Eli Lilly, Pfeizer, and UnitedHealth Group.
- Institutions are buying in for the discounts, upside, and dividend income.
The excitement around artificial intelligence (AI) has led to most attention—and capital–being concentrated in one corner while forgetting others, creating a gap and massive opportunity for rotation into some of these forgotten names that still carry greatly attractive fundamental profiles.
This is where the healthcare sector comes into play. Investors can see from any chart search that most companies in this space have fallen to levels not seen in years, especially when it comes to current valuation multiples.
In light of this shifting landscape, investors seeking diversification would do well to consider three companies that stand out as prime potential beneficiaries of a rotation from tech to healthcare: Eli Lilly Co. (NYSE: LLY), Pfizer Inc. (NYSE: PFE), and UnitedHealth Group Inc. (NYSE: UNH).
Eli Lilly: Dunking Back Toward 52-Week Highs
At approximately 78% of its 52-week high, Eli Lilly appears caught in a pullback. But that price dip may be temporary if broader sentiment improves—or if we see accelerating earnings.
Analysts now expect Eli Lilly’s earnings per share (EPS) to reach $6.77 by Q4 2025, nearly doubling from where it is today. Knowing that stock price performance is mainly driven by EPS growth, this is where the expectation for higher prices can be fulfilled, as there is enough fundamental growth in place to deliver.
Markets typically reward strong earnings outlooks with higher multiples and stock re-ratings. They are usually willing to pay a significant premium for names that they expect to outperform peer groups as well as the broader market. For Eli Lilly specifically, this outperformance could be driven by simply closing the gap to 52-week highs or something more concrete, such as EPS growth.
Eli Lilly currently trades at a high price-to-earnings (P/E) ratio of 62.0x, a significant premium above the rest of the medical sector and its average P/E valuation of 27.4x, which is what matters for investors. When earnings growth is this dramatic, premiums like this are justified.
If this EPS forecast materializes, Eli Lilly has ample room to trade back toward its highs. Investors should monitor product pipelines, trial data, and guidance for confirmation.
Pfizer: Dividend Power Meets Institutional Buying
Like LLE, PFE has fallen to approximately 77% of its 52-week high. But it also delivers a dividend payout of $1.72 per share with a compelling 7.1% yield, outperforming both inflation and treasury rates. Considering that tariff negotiations have made inflation and bond yields a main concern for investors, this is where Pfizer stock stands out.
Some in the so-called “smart money” corners of the market have already started to take advantage of this opportunity. As of early July 2025, institutional buyer Robeco Institutional Asset Management boosted its stake in Pfizer stock by 36.6% in response to today’s macroeconomic backdrop, bringing its total holding to $246 million.
This vote of confidence from macro-focused smart money reinforces Pfizer's potential as both a defensive income play and a value recovery candidate. Investors should keep an eye on dividend sustainability, pipeline news, and sector rotation patterns going forward.
UnitedHealth: Deep Discount, Strong Catalyst
Out of all the names on this list, UnitedHealth is the one that offers the biggest discount at a dismal 45% of its 52-week high levels. Considering how deeply discounted this stock is, there is a quickly closing window for investors to capitalize on this opportunity to create new wealth with a potential rebound.
However negative the current chart and price action may seem, investors should note that UnitedHealth benefits from inflation. Higher medical costs and people relying on healthcare plans help margin and revenue growth. With this in mind, there is a very real fundamental angle to be taken when it comes to this stock’s discount.
In fact, J.P. Morgan analyst Lisa Gill has reiterated her Overweight rating on UNH stock and issued a new price target of $418 per share. This implies that the stock could deliver a net upside potential of 48% from its current trading level, closing the gap with its 52-week highs.
With UnitedHealth, the fundamental logic remains strong: The company's businesses (ranging from insurance to data-driven care) are well-positioned to benefit from long-term secular tailwinds. And as investor focus broadens beyond tech, UNH could see a rapid revaluation.
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