Shares of embattled health insurance giant UnitedHealth (NYSE:UNH) plummeted by almost 20 percent earlier this week on new 2026 guidance calling for a roughly 2 percent drop in revenue for the year. Though a seemingly modest drop, management’s new guidance of $439 billion would see UnitedHealth’s total revenue fall for the first time since the 1980s. This selloff exacerbated what had already been a rough trailing 12-month period for UNH in which margin pressures and ongoing legal challenges caused the stock to lose ground. Will UnitedHealth stock recover, or is UNH a stock to avoid for the time being?
Why Health Insurers Are Under Pressure
As with many other parts of the insurance business, health insurers are facing a combination of rising costs and greater numbers of claims that are both weighing heavily on margins. In Q3 of last year, the average operating margin across the seven large publicly traded health insurance businesses was a measly 0.5 percent, down from 3 percent just one year earlier. This trend was also on stark display in United’s full-year report for 2025, with earnings from operations declining by 41 percent to just $19.0 billion on revenues of well over $400 billion.
2027 could prove to be another difficult year for the health insurance industry and for UnitedHealth as its leading provider of Medicare Advantage plans. While industry analysts had expected next year’s payments to increase by 4-6 percent, the Centers for Medicare and Medicaid Services announced earlier this week that the actual increase would be a paltry 0.09 percent. Given the rising costs that are already putting pressure on margins, this effective payment freeze could make 2027 an extremely difficult year for businesses like UnitedHealth.
UnitedHealth’s Legal and Regulatory Risks
Another large problem UNH faces is the growing legal and regulatory backlash against its business practices. Already embroiled in controversies stemming mostly from its vertical integration model, UnitedHealth has recently come under fire from the US Senate once again for allegedly pushing to reduce hospital transfers for residents in nursing homes.
Although no one challenge has been enough to adversely affect UnitedHealth, the cumulative pressure is difficult to ignore. Last year, a group of Democratic lawmakers introduced a bill that would ban the kind of top-to-bottom vertical integration that is core to United’s business model, likely forcing a breakup of the business if it becomes law. The business has also become involved in several lesser investigations and class action lawsuits, potentially setting it up for future regulatory difficulties.
Is United’s Moat Intact?
With the expectation of lower revenues ahead, it may be useful to take a look at UnitedHealth’s moat to see if it is still in a strong competitive position. As of Q3, United was still the largest accident and health insurance company in the United States, commanding a market share of a little over 22 percent.
It’s also worth noting that UnitedHealth has performed reasonably well up to now in terms of growing its revenue, despite the challenging environment. In its full-year 2025 earnings report, for example, United detailed revenue growth of 12 percent year-over-year to a total of $447.6 billion. In light of double-digit growth last year, the 2 percent revenue decline the business expects this year is a comparatively modest reduction.
Has UNH Become Undervalued?
Between its existing difficulties and the selloff that occurred after its new guidance was announced, UNH stock is down more than 45 percent over the last 12 months. Even after that drop, the stock is still trading at 22.2 times its trailing 12-month earnings and 0.6 times its sales.
While analysts do see a decent amount of upside in UNH, the gap between the standing set of analyst price targets and the current price can mostly be attributed to this week’s guidance-driven selloff. As such, the existing price targets may not accurately reflect the most up-to-date information as of the time of this writing. The current consensus target price for UNH is $372.32, giving the stock a projected upside of 26.5 percent from its most recent price of $292.29.
Another possible indicator of undervaluation is the fact that UNH’s dividend yield now far exceeds the averages it set through the 2010s and early 2020s. Until early 2025, the dividend yield had occasionally flirted with the 2 percent mark but had never actually crossed over it. Today, shares of UNH yield nearly 3 percent. UNH has also been a strong dividend growth stock, setting a compounded dividend growth rate of over 16 percent annually during the last 10 years.
Tying it All Together: Will UnitedHealth Stock Recover?
In many ways, UNH looks like the kind of depressed stock that could normally constitute a good buy. With its moat intact and an extremely long record of strong performance, UnitedHealth appears to be a high-quality business that is currently navigating difficult times. Often, such periods of difficulty create buying opportunities for investors in stocks that would be difficult to buy at attractive valuations under normal conditions.
The bigger problem, however, is the risk that the same pressure on Medicare payments that’s now expected to define 2027 could continue into future years. This may add one layer of risk too many, undermining even the reasonably compelling value argument by pushing a recovery further into the future. With 2026 expected to see revenue contraction and 2027 already set up to be an extremely difficult year for health insurers, UnitedHealth could simply be a little too far away from a rebound to be an appealing investment today.
Right now, UNH is likely a stock to hold off on. Though the business is still an extremely attractive one as the largest health insurer in the United States that’s trading at a lower-than-average price, the large set of challenges that UnitedHealth is facing could delay or even depress a future recovery. Although UnitedHealth is likely still worth watching, the stock could be facing a few too many large risks to be a good buy right now.
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