UnitedHealth Group (NYSE:UNH) is one of the largest health insurance providers in the world based on revenues. UNH shares have been rather volatile this year, losing over 6% so far. The cyberattack on Optum’s Change Healthcare unit in February this year took a massive toll on the company’s operations. Apart from UNH being non-functional for seven days, millions of customers were exposed to the risks of the data breach. UNH also noted that its bottom line would take a hit in 2024 owing to the cyberattack. Even so, UnitedHealth seems able to weather its challenges, having reaffirmed its annual revenue growth of 8% ($400-$403 billion) over FY23, in line with analysts’ estimates.
The company operates through two reporting segments. The first is UnitedHealthcare, a leading insurance products provider including Medicaid, Medicare, Health & Dental insurance, and Group plans for businesses. Meanwhile, its Optum segment is a technology-enabled health services platform offering data analytics, health services, and pharmacy care services.
Post the attack, the company is striving to restore the systems to 100% operating levels and has also come forward to support affected care providers with billions of dollars. Even so, shareholders remain unhappy with the inadequate firewalls between the operating segments that has caused the data breach. Significantly, the company is facing a class action lawsuit owing to its weak cybersecurity systems.
UnitedHealth Boasts Solid Financials
Operating as one of the global leaders in health insurance and specifically in the managed care space in the U.S., UnitedHealth still stands strong despite the current odds. UNH boasts over $370 billion in annual revenues and has consistently exceeded analysts’ earnings estimates in the last eight quarters.
Interestingly, on June 5, the company’s board lifted the quarterly dividend by 11.7% to $2.10 per share, reflecting an above industry average yield of 1.56%. At the same time, UNH undertakes regular share repurchases to reward its shareholders.
Furthermore, hedge funds are increasing their stake in UNH stock, apparently considering the recent dip in share price as a buying opportunity. As per TipRanks Hedge Fund Trading Activity tool, UNH currently has a Very Positive Confidence Signal as hedge funds increased their UNH holdings by 777,600 shares in the last quarter.
Analysts’ Views on UNH Stock
Moreover, Wall Street remains highly optimistic about UNH’s stock trajectory. In the past two months, UNH shares have received nine consistent Buy ratings from analysts and some have even increased the price target on the stock. Analysts expect managed care companies to have attractive growth and expanding margins potential in the long run. Additionally, UNH remains one of the top picks for analysts, based on its well-established business model, growing customer and revenue base, solid financial position, and consistently increasing share price.
What is the Future of UNH Stock?
UNH stock commands a Strong Buy consensus rating on TipRanks, backed by 18 Buys and two Hold ratings received in the past three months. The average UnitedHealth Group price target of $565.74 implies 16.8% upside potential from current levels, a reasonable measure for a growth stock.
Ending Thoughts
The Healthcare sector is often considered one of the best defensive plays in times of economic uncertainty, especially as healthcare spending continues to rise in the U.S. Pointedly, UNH shares have gained nearly 600% in the last ten years, as the company has a proven business model which continues to gain traction as Medicare and Medicaid plans and government contracts consistently add to its membership base. UNH stock scores a Strong Buy consensus rating from analysts and has a reasonable share price appreciation potential from expected growth in the coming months.
