UnitedHealth Group (UNH +2.77%) has been one of the more interesting case studies in the stock market this year. Many stocks that have witnessed plummeting share prices can point to President Donald Trump's new tariff policies as the culprit. UnitedHealth's 40% decline can be traced to a number of different hiccups, but perhaps ironically, tariff rhetoric hasn't made a direct impact on the company.
Let's explore what's going on at UnitedHealth right now and dig into the details on what's driving investors to run for the hills. From there, I'll draw some parallels from other businesses that remind me of UnitedHealth's current situation to help asses where the stock could be one year from now.
NYSE: UNH
Key Data Points
UnitedHealth Group has a mountain of problems right now, but...
Over the last month, UnitedHealth investors have received a lot of not-so-great information.
For starters, management surprised investors when the company reduced earnings guidance during the first-quarter financial report. Not only is lowering guidance usually met with some level of panic, but the underlying reasons for the decelerating earnings likely caused some investors to seriously question the company's leadership.
Essentially, management admitted that forecasts for utilization rates in its Medicare Advantage business as well as reimbursements from its pharmacy benefit management unit weren't anywhere close to reality.
The cherry on top of this news was that UnitedHealth CEO Andrew Witty abruptly stepped down and was replaced with its prior chief executive, Stephen Hemsley.
Image source: Getty Images.
...situations like this aren't anything unique
I know the details above make it sound like UnitedHealth Group is in a messy situation with no light at the end of the tunnel. But I can't help but draw some parallels between UnitedHealth's situation and that of another market leader, cybersecurity company CrowdStrike.
CrowdStrike stock plummeted last July following the discovery of a bug in its software during an update. The ripple effect was that many of CrowdStrike's users experienced widespread outages -- impacting their own operations and customers. At the time, this was a reputational nightmare for CrowdStrike.
However, as the chart above shows, CrowdStrike stock is now 113% higher than where it bottomed last July (about one year ago).
What does history suggest will happen?
To be fair, the CrowdStrike example detailed above isn't entirely an apples-to-apples comparison to UnitedHealth. Both companies operate in entirely different end markets. But at a high level, I'd argue both CrowdStrike and UnitedHealth are in the business of selling mission-critical products that are always in demand: cybersecurity and insurance.
Taking my analysis one step further, notice what UnitedHealth Group stock shares with the broader price movement of the S&P 500. Over a long time horizon, both the S&P 500 index and UnitedHealth stock increased in value. These trends underscore the idea that even though businesses experience headwinds from time to time, prices continue to rise for quality businesses despite these challenges.
Between the CrowdStrike example explored above and the broader movements across the S&P 500, I think that history suggests UnitedHealth Group will move higher in the long run. With that said, I am cautiously optimistic that shares will be much higher in just one year and rebound in a similar fashion to that of CrowdStrike.
As the chart above illustrates, UnitedHealth stock is now trading near five-year lows. Similar to what happened with CrowdStrike, I think this price action suggests that expectations around the company's performance are exceedingly low.
While 2025 won't be the best year for UnitedHealth from a growth perspective, management anticipates overcoming operational hurdles currently plaguing the company and achieving renewed growth by next year. When you combine the encouraging outlook with the flurry of insiders buying UnitedHealth stock right now, it could be argued that the bad news is already priced in. In my view, if UnitedHealth begins to show any hint of a turnaround, investors could begin pouring back into the stock.
As patient investors experienced with CrowdStrike, investing in UnitedHealth stock at its current levels could pay off big time. For these reasons, I think now is a compelling opportunity to buy the dip in UnitedHealth stock and prepare to hold on as the company works through its challenges.
