UnitedHealth Group UNH has lost nearly $140 billion from its market capitalization following a series of events such as downbeat Q1 results, CEO Andrew Witty stepping down and a potential criminal investigation by the Department of Justice.
What Happened: The health insurance giant’s shares plummeted by 22% after Witty’s alarming first-quarter results announcement in April. Witty resigned on May 13, citing personal reasons. The stock took another hit following reports of a Department of Justice (DOJ) investigation into potential criminal Medicare fraud by UnitedHealth, reported Fortune.
According to data from companies marketcap.com, UnitedHealth lost $140.53 billion in market capitalization since April 19.
"This is a stock that every growth-oriented portfolio manager in the world owned for a decade and made money on it like clockwork," stated Whit Mayo from Leerink Partners, a health care investment bank. "It's stunning. It's unthinkable,” he added.
Meanwhile, Jared Holz, a health care analyst at Mizuho Group stated, "They've been completely incapable of forecasting their own business." Holz added that the repeated missteps—not just this week but since 2023—indicate that other key members of the management team may also need to be replaced.
Furthermore, some analysts speculate that relaxed prior authorization controls may be driving up costs. As Bernstein analyst Lance Wilkes told The Wall Street Journal, "UNH may be relaxing prior authorization and other claims controls in response to policy pressures."
Why It Matters: Between 2013 and 2023, UnitedHealth's net income quadrupled from $5.6 billion to $22 billion, and its stock delivered a 715% return—far outpacing the S&P 500's 158% gain. However, now things have deteriorated.
Witty’s explanation for the poor Q1 results failed to appease analysts, with the company’s financial statements revealing issues across multiple divisions, particularly in its Medicare Advantage health care insurance business. This was due to an unexpected increase in the rate of health care usage by beneficiaries
Despite the disappointing results, some analysts remained bullish on UnitedHealth for the long term because it remains a dominant player in the industry, employing nearly 400,000 people and serving millions.
However, the recent events, including the DOJ probe and the CEO’s resignation, have led to a loss of confidence in the company, with some key asset managers even dumping the stock. Tom Hulick, CEO of Strategy Asset Managers shared an exclusive insight with Benzinga wherein he mentioned “a deterioration in fundamentals” as the primary reason for liquidating his position in the stock.
Analyst Whit Mayo opined that the only way new CEO Stephen J. Hemsley can restore investor, customer, and employee confidence in UHG is by letting results speak for themselves.
Benzinga Edge Stock Rankings shows that UnitedHealth has a weak price trend over the short, medium and long term. Its quality ranking is moderate at the 58th percentile, whereas its momentum ranking is poor at the 12th percentile; the details of other metrics are available here.
On Monday, the stock fell 5.78% to close at $302.98. On a year to date basis, it plunged nearly 40%, according to data from Benzinga Pro.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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