Uncertainty throughout the markets can often drive investors to look for safe harbors, especially those that have a history of solid performance. UnitedHealth (NYSE:UNH) has tended to fit the bill, having not lodged an earnings miss since 2008.
Until this past week, when in the words of CEO Andrew Witty, the healthcare company experienced an “unusual and unacceptable” miss. The company delivered revenues of $109.58 billion and a Normalized EPS of $7.20, which missed expectations by $2.03 billion and -$0.09, respectively.
The company also lowered its full-year EPS guidance to $26.00 to $26.50, below the previous range of $29.50 to $30.00.
The company cited two main reasons for the disappointing figures, increased activities within its Medicare Advantage businesses and higher 2025 reimbursement numbers.
The miss led to a large selloff and losses of more than 20% this past Thursday – the last trading day before markets were closed for the Good Friday holiday.
A crisis, goes the well-worn saying, is a terrible thing to waste. One investor known by the pseudonym JR Research argues that this applies to the recent selloff experienced by UnitedHealth.
“Investors biding their time to buy the stock shouldn’t miss the amazing opportunity afforded by this … nosedive,” asserts the 5-star investor.
JR reminds doubters that UNH is a massive undertaking, with numerous avenues of operation including tech and analytics and value-based care. The investor further explains that the company enjoys sector-leading profitability, comparing favorably with the competition.
“It has a well-diversified business model centered on its massive health insurance scale and leadership,” adds JR. “I believe it confers the company with an unparalleled resilience among its healthcare peers.”
Moreover, the extreme drop has given UNH much cheaper valuations. Its Forward Price-to-Earnings multiple of 15.4x is far below its 10-year average, and JR notes that in the past these types of dips previously drove investors to UNH.
“Its valuation multiples have also corrected adequately, veering into levels that previously attracted investors to buy the dips,” conclude JR Research, who rates UNH a Buy. (To watch JR Research’s track record, click here)
Wall Street is also infatuated with UNH. With 21 Buy ratings, UNH boasts a Strong Buy consensus rating. Its 12-month average price target of $635.17 has an upsid of ~40% in the year ahead. (See UNH stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.