UnitedHealth Group (NYSE: UNH) shares have endured a brutal two-day selloff, tumbling nearly 27% after the health insurance giant stunned investors with a steep earnings guidance cut tied to unexpected Medicare Advantage-related costs.
Key Points:
- UnitedHealth (UNH) shares fell 27% over two days, the steepest drop since 1998
- Company slashed 2025 earnings outlook by over $4 per share
- Medicare Advantage utilization shock and CMS model transition blamed
- Analysts remain mostly bullish, despite trimming price targets
On Monday, UNH stock plunged another 5.7% to close at $428.13, following a 22% rout on Thursday. The two-day crash marks the worst stretch for UnitedHealth shares since August 1998, when they sank 31% during a prior Medicare-related earnings shock, according to Dow Jones Market Data.
The company’s first-quarter results released last week sent shockwaves through Wall Street, as UnitedHealth lowered its full-year 2025 earnings outlook to a range of $26–$26.50 per share, down sharply from the prior $29.50–$30 estimate. The unexpected revision has prompted a wave of analyst recalibrations, even as most firms are urging investors to hold the line.
Medicare Advantage “Blind Spot”
The primary culprit behind the profit guidance slash? Soaring utilization rates in Medicare Advantage (MA), UnitedHealth’s flagship business segment. Management admitted it misjudged how many patients would seek care in early 2025, with activity levels surging at twice the expected rate.
Compounding the issue, UnitedHealth’s Optum division — which manages health services — saw a wave of new members entering MA plans, many of them displaced by competitors who exited certain markets due to reimbursement cuts.
Raymond James analysts, while maintaining a Strong Buy rating, described UnitedHealth’s challenges bluntly: “Management’s crystal ball has been unusually cloudy, and we have underestimated the challenges of navigating the new MA normal.” The firm slashed its price target to $540 from $635.
Oppenheimer analyst Michael Wiederhorn echoed similar sentiments, reducing his price target to $600 from $640 but keeping an Outperform rating. He noted that about two-thirds of the earnings cut stemmed from issues in Optum, and pointed to the rocky transition to CMS’s new risk-adjustment model, HCC Model V28, as a major operational headwind.
Despite the volatility, Wiederhorn remained optimistic: “UNH remains a premier operator, and we believe the company will address these issues over the course of 2025, mitigating any impact for 2026.”
Wall Street Stays (Mostly) Loyal
Even amid the chaos, Wall Street’s sentiment remains remarkably bullish. Of the 29 analysts surveyed by FactSet, 28 still rate UNH a Buy or equivalent, with just one analyst holding an Underweight position.
The support highlights confidence in UnitedHealth’s long-term fundamentals, massive scale, and its dominant position in the MA and healthcare services space.
However, this sharp drop — wiping out tens of billions in market value — is a reminder that even titans of industry are not immune to execution missteps or shifting regulatory sands.
What’s Next?
Investors will be closely watching how UnitedHealth adjusts its operations in response to this Medicare Advantage shock. Key focus areas include:
- Containing costs and recalibrating MA risk models
- Smoothing the transition to CMS-HCC V28
- Managing member influx and improving care forecasting
- Restoring investor confidence in guidance and visibility
For now, though, UnitedHealth is facing its most turbulent moment in decades. And while most analysts are still betting on a comeback, the path forward will require sharper forecasting, stronger execution, and fewer surprises.
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