UnitedHealth Group (UNH 2.56%) might want to change its stock ticker from "UNH" to "UGH." The latter better captures the feelings of the healthcare giant's shareholders in recent months.
A string of problems has caused UnitedHealth Group's share price to plunge roughly 50% from the peak set in the fourth quarter of 2024. Some analysts have downgraded the stock, with HSBC recommending that investors reduce their holdings and slashing its price target.
I have a different opinion, though. I think it's time to buy UnitedHealth Group stock. Here are three reasons why.
Image source: Getty Images.
1. Most of the company's problems should be temporary
I don't think investors should ignore UnitedHealth Group's issues. However, the challenges should be viewed with a long-term perspective. I suspect most of the problems the company faces should be temporary.
UnitedHealth Group has already largely moved past the cyberattack that occurred in February 2024. Although it cost the healthcare company over $2 billion, that issue has already proven to be a short-lived one.
Higher Medicare Advantage costs are the main culprit behind UnitedHealth Group's suspension of its 2025 full-year guidance. But the company says that it expects to return to growth in 2026. I believe this prediction because it makes sense. Insurers sometimes incur higher-than-anticipated costs and feel the pain for a while. However, once they adjust premiums, the problem goes away.
UnitedHealth Group announced the sudden departure of former CEO Andrew Witty at the same time it withdrew its 2025 outlook. Any worries investors might have had surrounding this move probably dissipated quickly after they learned Stephen Hemsley was returning to run the company. Hemsley served as CEO from 2006 through 2017, a period when UnitedHealth Group stock more than tripled.
2. The two biggest threats to UnitedHealth Group are iffy
I also view the two biggest threats to UnitedHealth Group as iffy. What are those threats? An alleged U.S. Department of Justice criminal investigation of the company and President Trump's stated goal to eliminate pharmacy benefits managers (PBMs).
Noted that I used the word "alleged" to describe the U.S. Department of Justice probe. The Wall Street Journal reported on May 14, 2025, that "people familiar with the matter" revealed that the DOJ had launched a criminal investigation of UnitedHealth Group for possible Medicare fraud. However, the company quickly responded that it hadn't been notified of any DOJ investigation. That status hasn't changed.
President Trump did announce that he wants to "cut out the middleman," a clear reference to PBMs. That's easier said than done, though, to put it mildly.
Removing PBMs from the U.S. healthcare system would require a detailed, comprehensive plan that so far has not been provided. That plan would also have to pass in both the Senate and the House of Representatives. You can bet that the PBM industry, including UnitedHealth Group, would lobby fiercely against any such legislation. I think this threat, while serious, has a relatively low probability of actually materializing.
3. The price is right
Finally, I think all these issues are fully baked into UnitedHealth Group's share price. The stock currently trades at a forward price-to-earnings ratio of around 13.3. That's well below the S&P 500 healthcare sector forward earnings multiple of 16.6. It's also the lowest valuation for UnitedHealth Group in more than a decade.
Could the stock fall further? Maybe, but I believe that UnitedHealth Group's share price has bottomed out. You might have noticed that UnitedHealth Group's share price has traded in a relatively narrow range since the steep decline in April and May. This trading pattern seems to confirm my view.
Any good news for UnitedHealth Group could provide a nice catalyst. I predict that the company will have some positive developments in the not-too-distant future, potentially including new full-year guidance that calms investors. If I'm right, buying UnitedHealth Group stock now could pay off handsomely.
