UNH stock is down more than 55% in one month, and Wall Street investors are wondering whether it is the right time to add the stock to the portfolio. UnitedHealth is a healthcare giant that provides healthcare and well-being services.
Established in 1977, the company has grown into a diversified health care powerhouse, leveraging its twin engines—UnitedHealthcare, which is its insurance arm, and Optum, which provides health services. Through UnitedHealthcare, the company offers a different set of insurance plans that cater to individuals, employers, and government entities. This enables it to generate substantial revenue by collecting premiums from policyholders, a model that hinges on striking a fine balance between risk management and cost-effective healthcare delivery.
The company is going through a rough phase, and UNH’s investors are losing money. Recently company’s CEO resigned citing personal reasons, but now investors are speculating whether the resignation was due to ongoing developments.
The Wall Street Journal recently reported that UNH is facing a criminal investigation for possible Medicare fraud. Reports suggest that the DOJ’s healthcare fraud unit is overseeing the investigation, which is focused on UnitedHealth Group’s Medicare Advantage business practices. While the exact nature of the probe is unclear, but it may be related to the company’s Medicare billing practices.
While the company in its recent response said that, “We have not been notified by the Department of Justice of the supposed criminal investigation reported, without official attribution, in the Wall Street Journal today. The WSJ’s reporting is deeply irresponsible, as even it admits that the ‘exact nature of the potential criminal allegations is unclear.’ We stand by the integrity of our Medicare Advantage program.”
UNH stock: Is the investigation the only worry?
For UnitedHealthcare, reports of ongoing investigations are not the only worry. Recently, the company’s CEO resigned citing personal reasons. UNH’s revenue and net income are slowing down, its margin is contracting, reason is that higher medical costs are squeezing UnitedHealth Group’s profits and are a key reason for its recent downturn.
Since the pandemic, more people are using healthcare benefits, leading to bigger medical bills for the company. As a result, UNH is finding it tough to keep these costs down. Its Medical Benefits Ratio, which shows how much of its premium money goes to customers’ medical costs, jumped from 82% in 2022 to 85.5% in 2024. The company’s reported net margins contracted from 6.2% to 3.6% over this period.
In another major blow to investors’ confidence, UNH surprisingly withdrew its full-year financial outlook. This uncommon action from a group typically recognized for its cautious yet dependable guidance has deeply rattled investors. Last month, UnitedHealth lowered its full-year 2025 earnings outlook to $24.65-25.15 per share, down from the previous range of $26.00-26.50 per share.
UNH’s stock fall is a big blow for ETFs, reports suggest. Currently, UnitedHealth is held by 391 ETFs, with more than 142 million shares owned across these Exchange Traded Funds. This extensive exposure is making the stock’s steep decline a significant drag on a wide swath of funds, affecting a range of institutional and retail investors alike.
What does the UNH’s Chart say?
The chart of UNH is messed up due to this extreme fall. Within a month, the stock is down more than 50%, it is below all moving averages, the stock did not respect any support points, and the chances of it doing so are not much going ahead. With the big red solid pipes indicating a doomsday pattern in stock, chances of its falling knife show continuing are higher.
For the stock to stop falling, it should close above $290-300 this week (a weekly close above the given price range, as we are considering the weekly chart of the UNH). If it closes below $250 (today’s low), chances are high that it will fall further to the $200-210 zone. On the upside, $300 is an immediate resistance; if taken out, the stock could rally to $370-380.
Should you catch the falling knife here?
It is not advised for the investors to catch the falling knife here (A popular term for buying swiftly sinking stock). Though in terms of value, UNH stock may feel like a decent buy, but given the ongoing investigations and its deteriorating financials, it could fall another 40-50% in no time. A DCF method valuation suggests the value of UNH stock to be $700+ (more than 60% from here), but it is still too risky to add UNH at this point.
Risk-taking investors should keep an eye on UNH’s price movement and the levels mentioned in the chart. Once the stock is near support, they can consider adding to it. UNH, with its 3+% dividend yield, strong cash position, if down another 20+% from here, will present a decent value, but investors should be keenly watching the ongoing investigations as any unfavorable findings could dampen the stock beyond repair.
