UnitedHealth (NYSE:UNH) stock looked like it was finally regaining its footing. After weathering a storm of bad news – including CEO Andrew Witty’s sudden resignation, the withdrawal of its 2025 financial forecast, and reports of a U.S. Department of Justice investigation into its Medicare billing practices – the stock staged a sharp rebound, jumping nearly 18% off its lows last Thursday. Insider buying and hopes that the worst was behind it gave investors reason to breathe a little easier.
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But that relief didn’t last long.
This morning, UNH shares tumbled nearly 6% after The Guardian published an investigation alleging that UnitedHealth secretly incentivized nursing homes to avoid hospitalizing residents. According to internal documents and whistleblower accounts, the company paid bonuses under programs like “Premium Dividend” and “Quality and Shared Risk” to nursing homes that kept hospitalization rates low – measured in “admits per thousand” (APK). In some cases, the investigation claims, facilities delayed or denied necessary hospital transfers, even for severe conditions like strokes. Staff were allegedly pressured to prioritize profit metrics, with some reportedly nudged to push “do not resuscitate” (DNR) orders on vulnerable patients.
Adding fuel to the fire, HSBC analyst Sidharth Sahoo weighed in this morning with a downgrade, cutting UNH stock from Hold (i.e., Neutral) to Reduce (i.e., Sell) and slashing the price target from $490 to $270. That marks a downside of roughly 16% from current levels.
“While the bulls point to a c30% discount to historical P/E as an attractive entry point, we highlight three key reasons that could spoil the recovery journey: 1) medical loss ratio (MLR) risk in 2025e (Visible Alpha consensus at 88.1% vs withdrawn guidance of 87-88%) and spillover into 2026e, 2) policy risk on Optum Rx via pharmacy benefit manager (PBM) bill or the proposed most-favoured nation (MFN) drug pricing model is underappreciated, and 3) we argue for a lower multiple driven by lower ROE expectations,” Sahoo explained.
Despite the warning, Sahoo remains a bit of an outlier. Most analysts aren’t ready to abandon ship. UnitedHealth still holds a Moderate Buy consensus, supported by 19 Buys, 6 Holds, and just one Sell. If the average price target of $380.43 pans out, the stock could surge 18% from Tuesday’s closing price. (See UNH stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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