UnitedHealth Stock Has Lost Half Its Value. Why Analysts See Hope.

UnitedHealth Group has been under pressure because customers in its Medicare Advantage business have been using more medical care than it expected. (Dreamstime)

While UnitedHealth Group is having a terrible year—there’s no way to sugarcoat it—the insurer does have some fans.

Shares have cratered 50% since the close on April 16, before the company reported first-quarter numbers. Both earnings and revenue fell short of expectations and management slashed its full-year financial guidance.

The stock’s performance hasn’t been much better over the longer term: UnitedHealth has lost 42% so far this year, and 49% over the past 12 months amid rising medical costs and a string of disappointing earnings reports. Those figures compare with gains of 6.6% and 10%, respectively, for the S&P 500 index.

However, the insurer still has some cheerleaders heading into its second-quarter earnings report, which is slated for July 29.

In a research note Tuesday, Leerink Partners analysts led by Whit Mayo reiterated an Outperform rating on the stock, even as they trimmed their price target to $340 from $355 to reflect changes to their forecasts of UnitedHealth’s financial results.

Leerink lowered its 2025 earnings per share estimate to $18.20 from $23.15, below a consensus estimate of $20.53, according to FactSet.

“Buy-side expectations have been moderately fading over the past month, ahead of the forthcoming reinstatement of UNH’s 2025 [earnings per share] guide,” the Leerink team wrote. “We think that $18 to $19 is generally the expectation, and anything in this zone should assuage fears given the materiality of the reduction in overall margins.”

UnitedHealth originally forecast adjusted earnings per share in the range of $29.50 to $30 in December, before cutting that forecast in April, and pulling it altogether a month later.

On a conference call in May, CEO Stephen Hemsley apologized to stakeholders. “Many of the issues standing in the way of achieving our goals, as well as our opportunities, are largely within our control,” Hemsley said.

The company’s UnitedHealthcare division has struggled as clients of its Medicare Advantage business use more medical services than expected.

Leerink’s updated forecast assumes “almost no margin” in the Medicare Advantage business, though analysts anticipate “a steady climb back to 3% margins” by 2028. That leaves them “reasonably constructive” about the balance between risks and potential rewards, Leerink said.

Still, the firm said, there is “no shortage of industry challenges across every product.” In addition to reducing their forecast for 2025 earnings per share, the analysts also trimmed their 2026 estimate to $21 from $26.36.

So what underpins Leerink’s generally upbeat view? For starters, there is scarcity value. UnitedHealth Group has a strong market position as the largest health insurer in the U.S. and a major player on a global scale.

Leerink characterizes UnitedHealth as a “global growth stock that attracts a unique and diverse shareholder base.” In addition to its record of achieving long-term targets, the company’s liquidity and market capitalization just shy of $272.7 billion “should drive a higher relative valuation,” the firm wrote.

“We view UNH as a simple way to invest into the secular growth of U.S. medical spending,” the analysts wrote. “UNH’s asset base and earnings are diversified across a unique set of capabilities spanning the entirety of the care delivery system.”

This refers to UnitedHealth’s dual business model. The insurer operates through its UnitedHealthcare segment, which serves as a major driver of revenue, as well as its Optum health-services division.

Even with the odds stacked against it, Leerink believes UnitedHealth is on pace to make a recovery. In the firm’s view, growth could reaccelerate as soon as 2027.

“Against a challenging and dynamic backdrop, we’re cautiously optimistic on the positive thesis from here,” the analysts wrote.

Morgan Stanley analysts took a similar stance, forecasting earnings per share of $20.94 for 2025, and $24.91 for 2026. The firm noted in a Tuesday note that both estimates are below consensus.

Since assuming the role in May, CEO Hemsley “has made it clear that under his lead, UNH would set achievable targets and return to a culture of beat and raises,” analysts led by Erin Wright said. That means the company’s 2025 outlook could come in below both the firm’s estimates and the Street’s, “potentially, sub-$20 range.”

While the analysts trimmed their price target to $342 from $374 to reflect estimate changes, they reaffirmed an Overweight rating on the shares. In their view, UnitedHealth’s exposure to government businesses positions it to weather any changes in the U.S. healthcare system.

Only time will tell if this sustained optimism pays off. Expectations have already been lowered heading into the second-quarter print, “but the sense of trepidation remains,” Morgan Stanley wrote.

The broader healthcare sector has struggled with shifting market conditions. Truist Securities analysts noted Wednesday that intra-quarter guidance suspensions from UnitedHealth and smaller players Centene and Molina Healthcare “have largely cited utilization pressures.”

While UnitedHealth pointed to elevated trends in Medicare Advantage, Centene projected lower-than-expected growth in Affordable Care Act exchanges. Meanwhile, Molina has seen pressure in all three lines of business including Medicaid and Medicare Advantage.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com