UnitedHealth Faces Challenges Amid Leadership Change and Slashed Price Targets

MINNEAPOLIS, Minn. — UnitedHealth Group continues to struggle as it faces a series of setbacks over the past year. Following the assassination of its CEO in December 2024, the company’s stock has dropped 44% year to date, largely attributed to ongoing scrutiny over its practices and investigations by the Justice Department.

Analysts have responded by reducing their price targets for UnitedHealth ahead of its second quarter earnings. Morgan Stanley’s Erin Wright cut the target from $374 to $342, citing persistent issues within its health services arm, Optum. Wolfe Research also lowered its estimate from $363 to $330, warning of volatility in near-term earnings.

Despite these cuts, Barclays maintained a price target of $337, emphasizing ongoing pressure on earnings while retaining a ‘Buy’ rating. Historically, UnitedHealth has provided a significant return on investment with a 450% rise in stock price over the past two decades.

UnitedHealth operates two main segments: UnitedHealthcare, which offers health insurance, and Optum, a services division that includes pharmacy benefits and care delivery. This dual approach positions the company as the largest health insurer in the U.S. and top globally by revenue.

In the first quarter of 2025, UnitedHealthcare added 780,000 new customers, bringing the total to 3.2 million. This growth has been linked to a strong demand for tailored healthcare services, boosting revenues across segments, including Optum Insight and Optum Rx.

Optum’s contract-based revenue model has provided stability compared to typical insurance revenue, which is more susceptible to cost fluctuations. Currently, 43% of UnitedHealth’s operating income comes from this division, and the company plans to enroll an additional 650,000 patients under value-based care agreements.

Demographic trends also favor UnitedHealth, as aging populations increase the need for integrated health solutions. However, concerns linger about the company’s claims denial rate and financial ratios. The combined ratio stands at 97.2%, leaving little margin for error, while an increase in the medical care ratio from 84.3% to 84.8% could threaten profitability.

Despite missing recent revenue and earnings estimates, UnitedHealth reported $109.6 billion in revenues for Q1 2025, an increase from the previous year. Optum showed significant growth, with revenues rising to $63.9 billion and improved operating margins.

Looking forward, analysts maintain a ‘Moderate Buy’ rating for UnitedHealth stock, with an average target price of $358.70, indicating a potential upside of 27%. The company is scheduled to release its next earnings report on July 29.