Following the WSJ’s report on Medicare Advantage fraud investigation by the Justice Department, UnitedHealth Group (NYSE:UNH) stock hit a 5-year low on May 15th. Over a month, UNH shares are down 31%, currently priced at $292.80 per share.
This is a 53% value deflation from UNH all-time high price of $630 not so long ago, in November 2024. In addition to the Medicare probe, the largest health insurer still faces ongoing antitrust investigation, launched in February 2024 but delayed due to staff reductions.
On top of that, the company faces a crisis of leadership. After the assassination of CEO Brian Thompson in early December, Andrew Witty took over. However, he too was unexpectedly replaced on May 13th with Stephen J. Hemsley, as Witty resigned for personal reasons.
Altogether, these factors drove UNH stock in oversold territory, as the Relative Strength Index (RSI) dropped under 30 from over 70 in April. In many ways, this is a similar situation with Boeing (NYSE:BA), as bad press had a suppressing effect, only for the stock to exit yearly lows and make shareholders happy. But let’s examine if UnitedHealth Group has equally enduring fundamentals?
Where Does UnitedHealth Group Stand Against Rivals?
According to an American Medical (TASE:BLWV) Association (AMA) report, UnitedHealth Group is the largest commercial health insurer on a national level, having maintained its market share relatively closely from 2014 to 2023.
In Medicare Advantage, UnitedHealth holds a firm advantage, having increased its market share from 25% in 2017 to 29% in 2023. For comparison, Humana (NYSE:HUM) holds 18% market share in both periods, while other companies are under 10% with the exception of CVS (former Aetna) in 2023 at 11% market share.
AMA based this data on commercial enrollment in MA, PPO, HMO, POS, and public exchange plans. The report concluded that the US health insurance market is highly concentrated, with Herfindahl-Hirschman Indices (HHI) showing 95% concentration in both 2014 and 2023.
Concentration in the Medicare Advantage (MA) market is even higher, at 97%, although fallen from 99% in 2017. This is likely why the DoJ initiated a probe in UnitedHealth Group.
Previously, the DoJ blocked major mergers between Anthem and Cigna (NYSE:CI), as well as Aetna acquiring Humana. The reasoning was that this would introduce anticompetitive harms, raise prices and stifle innovation. Ultimately, these merger blocks lessened the competitive pressure on UnitedHealth Group in the process.
Is UnitedHealth Group Easily Replaceable?
Everyone intuitively understands why Boeing enjoys a formidable moat. The company’s deep reservoir of talent, vast infrastructure, and mastery in engineering and logistics make it virtually irreplaceable. Any “replacement” for Boeing would be more an exercise in nomenclature or corporate restructuring than an actual substitution by a rival firm.
Similarly, though UnitedHealth Group (UHG) operates in a world shaped by financial structures rather than heavy industry, it too commands an entrenched, vertically integrated ecosystem. This spans supply chains, clinics, physicians, pharmacies, and expansive data center infrastructure.
Put differently, UHG is as structurally embedded in the U.S. healthcare system as Alphabet (NASDAQ:GOOGL) is in the technology sector. Much like Microsoft’s approach to gobbling up promising startups, UHG expands by systematically absorbing subsidiaries. In 2024 alone, it acquired full or partial stakes in over 100 surgery centers, adding more than 250 new entities to its portfolio.
While the Department of Justice blocked UHG’s $3.3 billion bid for Amedisys (NASDAQ:AMED) in November 2024, it’s worth noting the company had already acquired Amedisys’s key competitor, LHC (HN:LHC) Group (NASDAQ:LHCG), for $5.4 billion, securing a strong foothold in the hospice care space.
In essence, just as the federal government tolerates high market concentration in Big Tech, with only occasional regulatory pushback, it adopts a similar posture in healthcare. For investors concerned that fragmentation could undermine UHG’s dominance, the more pertinent question is:
Does the U.S. government show a preference for allowing a few dominant players to anchor each sector of the economy, or does it actively promote fragmentation?
UHG’s Financial Performance
Alongside UnitedHealth Group, the company operates within two main subsidiaries, Optum and UnitedHealthcare. For Q1 2025 ending March, delivered on April 17th, UHG reported $9.8 billion revenue increase from the year-ago quarter, to $109.6 billion.
Moreover, UHG’s operating margin increased from 5.8% to 6.2% in that period. In total, the company’s net profits increased to $6.47 billion from the net loss of $1.2 billion in the year-ago quarter. Across Optum and UnitedHealthcare, the company’s profitability, as consolidated operating margin, increased from 7.9% to 8.3%.
However, for full year 2025, UHG revised its outlook performance downward, from adjusted earnings per share of $29.50–$30 to $26–$26.50 EPS. Now departed Witty called this “unusual and unacceptable” despite the continued strong growth.
At present, UHG has a price-to-earnings (P/E) ratio of 12.26, which is significantly lower than the average P/E of 16.03 in the healthcare sector. This again points to UNH stock being oversold despite the regulatory probe concerns.
UHG’s Price Targets
Per WSJ’s forecasting data, the average UNH price target is $378.86 per share. Given that the current UNH price is $292.80 per share, this gives investors a profit potential of 30%. The bottom estimate holds at $270, while the UNH price target ceiling is $552 per share.
The overwhelming majority of analysts recommend buying UNH shares at this price point, 17, while only one analyst thinks it’s worth selling. In addition to the DoJ probe regarding Medicare Advantage, UHG faces a class-action lawsuit alleging that the company defrauded shareholders following the backlash from the assassination of its CEO.
In other words, that UHG lowered its potential profitability from such intimidation. Additionally, there is a class-action related to claims that UHG’s AI-powered system denied patients for post-acute care, potentially resulting in deaths. However, the federal judge presiding over the case had already dismissed five out of seven such claims.
At the end of the line, although UHG’s leadership flux is somewhat concerning, investors should view it in a similar light to leadership changes within Boeing and Intel (NASDAQ:INTC). In addition to the likely UNH stock rise, investors can also look forward to a $2.10 quarterly dividend payout per share.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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