MW UnitedHealth sees a longtime bull throw in the towel after stock's plunge

By Tomi Kilgore

Raymond James reluctantly double-downgrades the insurer's stock after the selloff, saying the outlook is just too uncertain to stay bullish

UnitedHealth Group Inc. gave some analysts no choice but to abandon their bullish calls after a suspended full-year financial outlook, coupled with an abrupt leadership change, sent the insurer's stock sinking to multiyear lows.

Raymond James's John Ransom went as far as cutting his rating on the stock by two notches. While he wasn't surprised that a new chief executive was named given the company's recent issues, he was basically shocked that the guidance was dropped just a month after a big downward revision.

Ransom downgraded the stock $(UNH)$ to market perform after rating it strong buy for at least the past three years, leapfrogging his firm's outperform rating level. Like UnitedHealth, Ransom removed his outlook for the stock's price, which was previously at $540.

The double downgrade comes a day after the stock tumbled 17.8% on Tuesday to close at a near five-year low. While the stock edged up 0.7% in midday trading on Wednesday, it has plunged 46.4% since UnitedHealth slashed its full-year outlook on April 17.

In afternoon trading on Wednesday, the stock slipped 0.2% to reverse an earlier intraday gain of as much as 3.7%. It was in danger of a seventh straight loss, which would be the longest such streak since the eight-day stretch that ended on March 6, 2024.

"We generally despise 'throwing in the towel' in situations like this, as (usually) we find the investor reaction to be more, and, in many cases, much more pronounced than the fundamental change," Ransom wrote in a note to clients.

Read: UnitedHealth's troubles get worse, as 2025 outlook suspended and CEO steps down

But he felt he had to do so in this case. That's because the timing of the pulled guidance means the visibility on the rest of 2025 is now "very low," and because growth for 2026 looks set to be muted as the company prices its Medicare Advantage plans to favor profitability over increasing membership.

He's also worried about how UnitedHealth will fare during the upcoming Star Ratings system test in October, in which the Centers for Medicare and Medicaid Services rates an insurer's Medicare Advantage plans on a scale of one star (worst) to five stars (best).

There's risk of ratings cuts, as Ransom noted that about 70% of members in UnitedHealth's Medicare Advantage plans are in 4-star plans.

BofA Securities' Joanna Gajuk also turned neutral on UnitedHealth's stock after being at buy.

For Gajuk, the change in leadership also wasn't an issue. What worried her was that not only did the Medicare Advantage trend get "significantly worse," but it seemed to spread to a broader group of patients than just the seniors highlighted in April.

She did say, however, that the pulled guidance, as damaging as it was for the stock, may be the company's way of giving its new CEO, Stephen Hemsley, more time to establish guidance that he'll be responsible for meeting.

Gajuk also addressed investor concerns that UnitedHealth's issues may be a warning for other insurers, which was expressed by the selloff in shares of rivals on Tuesday.

"As of now, we view [UnitedHealth's] issues as company specific, and we think the quick resignation of the CEO [Andrew Witty] indicates this is more likely to be internal than external," Gajuk wrote.

UnitedHealth's stock has dropped 38.5% in 2025 to make it the Dow Jones Industrial Average's DJIA worst performer this year. In comparison, the Health Care Select Sector SPDR exchange-traded fund XLV has lost 6.1% this year and the Dow has eased 1.2%.

-Tomi Kilgore

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May 14, 2025 14:46 ET (18:46 GMT)

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