That large groan you might have heard a few months back could have been a chorus of disappointed shareholders of UnitedHealth Group (NYSE:UNH). The perennial blue chipper had quite a hiccup with its Q1 2025 earnings report – which failed to meet expectations for the first time since 2008.
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The hits kept coming, and in quick succession. A surprise resignation by the CEO, withdrawn guidance, and the announcement of additional auditing scrutiny from the Center for Medicare and Medicaid Services for Medicare Advantage plans all conspired to push the share price down further. All told, UNH has lost some 50% between mid-April and mid-May, though the share price has mostly stabilized in the ensuing weeks.
Is this how things will play out going forward, or will the healthcare giant begin a slow recovery upwards? One investor known by the pseudonym White Star Research believes that UNH has now reached “rock bottom” – leaving only one direction for UNH to flow.
“This could present a tremendous opportunity to acquire shares of a systemically important company in a solid financial shape with ample cash flows and at a rock-bottom valuation,” posits the investor.
White Star notes that it is tough to gauge the upcoming quarters, given that UNH has pulled its guidance. The upcoming earnings calls could therefore be “upside catalysts,” during which UNH just might pull off a pleasant surprise.
“By effectively letting Wall Street completely in the dark, this could set up for major positive earnings surprises as estimates are likely to be revised downwards materially and a ‘less bad than expected’ quarter could generate a strong price reaction to the upside,” adds White Star.
Moreover, new CEO Steve Hemsley has previously run the company, with oodles of success. White Star further explains that during Hemsley’s tenure between 2006 and 2017, UNH shares outperformed the S&P 500 by almost double.
While acknowledging the near-term uncertainty, those in it for the long haul have an opportunity to gobble up UNH at a “depressed” valuation, states the investor.
“UNH should remain a victim of both sentiment and regulatory overhangs in the short term, over the long run shares should re-rate towards market multiples,” concludes White Star Research, who rates UNH a Strong Buy. (To watch White Star Research’s track record, click here)
Wall Street tends to agree, and with 18 Buys, 7 Holds, and 1 Sell rating, UNH has a Moderate Buy consensus rating. Its 12-month average price target of $361.91 suggests an upside just shy of 20%. (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.