Opportunity to buy UnitedHealth Group shares or not?

UnitedHealth Group Inc. NYSE:UNH gave up nearly all of its 12-month gains in the past week after two unrelated incidents rocked the company. As of the close of trading on March 1, 2024, UNH shares had lost more than $25 billion in market value.

The health insurer continues to grapple with the fallout from the cyberattack initiated by the “Blackcat” ransomware group against its subsidiary Change Healthcare. The attack created significant disruptions in electronic prescription delivery and insurance transactions, particularly among independent healthcare providers.

The bad news came on February 28, when the U.S. Department of Justice (DOJ) announced that it had launched an investigation into UnitedHealth Groupo due to concerns about some dealings between the company’s insurance division and its services unit Optum sanitary ware. And in particular, how the company’s physician group purchases may have affected rivals.

Despite all the bad news, investors can now buy UNH stock at six-month lows. Is it a dive 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 go, this wouldn’t appear to be a reason to sell.

UnitedHealth Group insists there is no evidence the cyberattack 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 financial assistance to affected suppliers.

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

Interestingly, UnitedHealth Group provided an optimistic outlook on the state of its Medicate Advantage business, despite rising costs. The same can’t be said of competing medical titles like Humana Inc. NYSE: MOODAND The Cigna Group NYSE: CI, both have faced rising Medicare Advantage costs.

Shares of UnitedHealth group, one analyst remains bullish

Since the cascade of bad news began, at least one analyst has reiterated his bullish view on UNH stock. 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 shares, which is 3% higher than the analysts’ consensus price target of $575.79.

Are UnitedHealth Group shares a buy?

As of early March 4, 2024, the technical action suggests that some buyers may enter. However, the stock is still down more than 1.3% in morning trading and sits at a key support level. If it fails to stay around $480, it is not unthinkable that UNH shares could approach the $460 range reached at the beginning of the summer.

Given that market sentiment largely depends on the Fed’s statements this week, UNH appears to be on hold until there is clear confirmation of a trend reversal.

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