By Elsa Ohlen

It has been a terrible year for UnitedHealth stock, and it doesn't look like it's getting better anytime soon after the health insurer pulled its outlook for the year and announced that its CEO was stepping down. Now, analysts are rushing to downgrade UnitedHealth shares even though they are down 40% this year.

The worst of UnitedHealth's losses have come even as the S&P 500 erased its losses for the year, after hitting a 52-week low on April 8 following President Donald Trump's sweeping tariff announcement that stunned the market.

Since that bottom and through Tuesday's close, the S&P 500 has bounced back 18%. UnitedHealth however, is by far the worst performer in the blue-chip index during that time, down a whopping 43%.

The second, third and sixth worst performers are also major health insurers: Humana, Elevance Health and CVS Health, down between 19% and 11% each.

Shares of UnitedHealth were up roughly 3.5% to $322.45 in premarket trading Wednesday, after closing 18% lower Tuesday as it suspended its 2025 guidance and announced its former CEO would take the reins again. Shares are now at their lowest level since October 2020, according to Dow Jones Market Data.

It came less than a month after the company had already significantly cut back on their guidance in April, which led to the biggest 2-day selloff in shares in 27 years.

"We chose not to jump out the basement window after one of the worst-performing days in the share's history, only to be rewarded with another large negative revision and share decline a month later," Deutsche Bank's George Hill wrote late Tuesday.

While Hill is still not throwing in the towel, he lowered his price target on the stock to $362 from $521, still reflecting a Buy rating.

Others have had enough. Raymond James downgraded UNH share to Market Perform from Strong Buy on Wednesday, saying that the CEO change was expected -- but the guidance removal was not.

Analyst John Ransom sees multiple reasons for caution, including low visibility on earnings for the remainder of the year given the now nonexisting guidance as well as likely muted membership growth in 2026.

The company also needs to pass the "Stars test" in October with around 70% of its members in 4-star plans, Ransom notes. The "test" refers to the Medicare Star rating system by the Centers for Medicare and Medicaid Services, or CMS, that rates the quality of Medicare Advantage plans. Only plans with four or more stars are eligible for bonus payments from the government, which can be large.

"In short, it will be awhile until the smoke clears," Ransom says.

Morgan Stanley and Jefferies also cut their UnitedHealth price targets to $374 and $400, respectively, while Bank of America analysts downgraded the stock to Neutral from Buy.

UnitedHealth cited higher-than-expected medical costs as seniors on its Medicare Advantage plans sought more care than expected. CFO John Rex told investors on a Tuesday call that there were indicators that the higher utilization rates it was seeing for its MA plans were "broadening" to other sectors.

UnitedHealth said it expects to "return to growth" in 2026, but didn't give any further specifics.

For now, investors will just have to decide if to put enough faith in the health insurer under the experienced hand of new CEO Stephen Hemsley -- who led the company from 2006 through 2017 -- or if to jump out of the basement window.

Write to Elsa Ohlen at elsa.ohlen@barrons.com

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May 14, 2025 09:30 ET (13:30 GMT)

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