Is UnitedHealth Group Stock a Strong Buy or a Falling Knife?

Key Points

• UnitedHealth Group stock has given up almost all of its 12-month gains due to a cyber attack at its Change Healthcare subsidiary and the announcement of a DOJ probe. 
• While investors are selling the news, only one event may bring long-term uncertainty.  
• Interested buyers may want to wait for confirmation of support before venturing into UNH stock.  

UnitedHealth Group Inc. NYSE: UNH has given up almost all of its 12-month gains in the last week after two unrelated incidents have rocked the company. At the close of trading on March 1, 2024, UNH stock had lost more than $25 billion in market value.  

The health insurance provider continues to grapple with the fallout from the cyber attack initiated by the "Blackcat" ransomware gang on its Change Healthcare subsidiary. The attack created significant disruptions to electronic prescription deliveries as well as insurance transactions, particularly among independent healthcare providers. 

The bad news kept coming on February 28 when the U.S. Department of Justice (DOJ) announced that it had launched an investigation into UnitedHealth Groupo over concerns about certain relationships between the company's insurance division and its Optum health-services unit. And specifically, how the company's purchases of doctors' groups may have affected rivals.  

For all the bad news, investors can now acquire shares of UNH at six-month lows. Is this a dip to buy or a falling knife to avoid? 

 UnitedHealth Group - Two Different Concerns 

Investors don't like uncertainty. As unfortunate and serious as the cyber attack is, UnitedHealth Group is not the first company, nor will it be the last, to fall prey to these attacks. There's a public policy discussion to be had, but as far as the stock's fortunes, this wouldn't appear to be a reason to sell.  

UnitedHealth Group insists that there is no evidence the cyber attack went beyond Change Healthcare. The company is also working closely with cybersecurity companies such as Palo Alto Networks Inc. NYSE: PANW to investigate this attack. The company is also offering temporary funding assistance to affected providers. 

The Federal investigation is another matter altogether. United HealthGroup is the nation's largest Medicare Advantage insurer. However, it has repeatedly drawn criticism for denying necessary care and overcharging taxpayers. This falls in line with anti-monopoly campaigners who have argued for years that the consolidation in the healthcare industry has harmed patients through higher costs for worse care.  

Curiously, UnitedHealth Group delivered an optimistic outlook about the state of its Medicate Advantage business despite the rising costs. The same couldn't be said of competing medical stocks such as Humana Inc. NYSE: HUM, and The Cigna Group NYSE: CI, both of which have been wrestling with increased Medicare Advantage costs.  

 UnitedHealth Group Stock, One Analyst Remains Bullish 

Since the cascade of bad news began, at least one analyst has reiterated its bullish opinion of UNH Stock. The UnitedHealth Group analyst ratings on MarketBeat show that on February 29, 2024, Royal Bank of Canada NYSE: RY reiterated its outperform rating on the company. The bank also has a $596 price target for UNH stock, which is 3% higher than the analysts' consensus price target of $575.79.  

Is UnitedHealth Group Stock a Buy? 

Early March 4, 2024, technical action suggests some buyers may be coming in. However, the stock is still down over 1.3% in morning trading and is at a key support level. If it fails to hold at around $480, it's not unthinkable that UNH stock could drift close to the $460 range it hit in early summer.  

With market sentiment largely dependent on the Fed remarks this week, UNH looks like a Hold until there is clear confirmation of a reversal in the trend.