UnitedHealth Stock Is One of the Worst-Performing S&P 500 Stocks in 2025. Should You Buy the Dip?

Wall Street is cheering fresh highs as the S&P 500 Index ($SPX) wraps a solid second quarter, closing June 2025 strong. The rally has been powered by cooling inflation, resilient earnings, and fading tariff concerns after April’s policy shock. Just three months back, the market briefly dipped toward bear territory amid geopolitical tensions, China’s AI push, tariff fears, and fiscal uncertainty, keeping investors on edge about the rebound’s staying power.

Despite the S&P rallying over 28% from its April lows of $4,835, the bull run has still left many big names behind. Nearly a third of the index’s stocks still ended the first half of 2025 in the red. UnitedHealth (UNH), a giant in health insurance and managed care services, has plunged 39% so far in 2025. UNH stock has been hit by soaring Medicare Advantage costs, a probe into Medicare fraud, and a sudden CEO exit, making it the index’s fourth-worst performer.

While UNH is at five-year lows, a 1.8% five-day bounce hints at some life. With the dividend-paying stock halved and trading at a compelling valuation, is this a classic “buy the dip” setup? Or a moment for caution despite the allure of value and yield?

Founded in 1977, UnitedHealth has grown into a $295 billion healthcare heavyweight. With its deep roots in health insurance and care services, the company runs on two powerhouse engines: UnitedHealthcare and Optum. UnitedHealthcare handles the insurance side, offering plans that serve over 50 million people. It’s the backbone, giving the company scale, reach, and reliable revenue. But it’s Optum that brings the spark, driving growth through data, tech, and pharmacy solutions. From analytics to care delivery, Optum’s strategy pushes innovation across the system. Together, these segments give the company its edge in a complex healthcare landscape.

UNH stock has been in free fall in 2025, hitting a low of $248.88 in May. Over the past 52 weeks, the stock has declined 38%, trailing far behind the broader S&P’s surge of 13%. However, UNH stock is rebounding, up 1% over the past month.

UnitedHealth’s downfall in 2025 was not just a single bad headline. It was a chain reaction that started fast and spiraled hard. It kicked off on April 17, when the company shocked the Street by slashing its full-year earnings forecast. This was because a flood of higher-acuity Medicare Advantage patients drove costs far beyond expectations, exposing just how outdated and fragile their forecasting models had become.

Then May hit like a wrecking ball. CEO Andrew Witty abruptly resigned, raising eyebrows amid growing pressure. Days later, reports surfaced of a U.S. Department of Justice investigation into alleged Medicare fraud. By mid-May, the stock had crashed, hitting five-year lows. Just when it seemed the damage was done, more scandal dropped with accusations of UnitedHealth secretly paying nursing homes to avoid costly hospital transfers. Even insider buying gave only a brief lift to UNH. In a short span, UnitedHealth went from a rock-solid name to a cautionary tale unraveling in real time.

After its brutal springtime plunge, UNH stock is priced at 14 times forward earnings and 0.7 times sales, trading in bargain territory. Those multiples sit well below both the sector medians and its own five-year averages, catching the eye of value hunters sniffing out a possible rebound.

Despite the stock’s decline, UnitedHealth has signaled some confidence where it counts: dividends. In June, the company hiked its quarterly payout by 5.2% to $2.21, marking 15 consecutive years of increases. Paid out on June 24, the hike pushed its annual yield near 2.6%.

On April 17, UnitedHealth reported Q1 2025 earnings, and it wasn’t the kind of update Wall Street wanted to hear. Revenue climbed 9.8% year-over-year (YOY) to $109.6 billion but still came in shy of expectations. Adjusted EPS rose 4.2% to $7.20 yet missed the estimated mark of $7.27.

UnitedHealthcare, the insurance arm, posted a solid 12.2% revenue gain to $84.6 billion. Meanwhile, Optum saw more modest growth of 4.6% to $63.9 billion, with Optum Rx doing the heavy lifting. Still, rising costs loomed large. Total operating expenses surged 9.4% annually to $100.5 billion.

On the brighter side, the company exited the quarter with $34.3 billion in cash and short-term investments and generated $5.5 billion in operating cash flow. Shareholders weren’t left in the cold either, with over $5 billion returned through buybacks and dividends.

UnitedHealth’s steep selloff wasn’t just about Q1 results. It was the guidance cut that really rattled sentiment. Management slashed its 2025 adjusted EPS outlook to between $26 and $26.50, down from the initially forecast range of $29.50 to $30 in December 2024 and below fiscal 2024 adjusted EPS of $27.66. Surging Medicare Advantage costs and shifts in Optum’s patient mix have taken a real bite.

Now, all eyes are on the fiscal Q2 report, expected to be released on July 29 before the market opens. Analysts forecast the Q2 bottom line to be around $5.08 per share, down 25% YOY. Looking to fiscal 2025, adjusted EPS is expected to decline 20% annually to $22.07, then surge by 15% to $25.39 in fiscal 2026.

Last Wednesday, UBS reiterated its “Buy” rating on UNH stock but trimmed the price target to $385 from $400. The cut followed CEO Stephen Hemsley’s cautious tone at the June 2 meeting, hinting at more conservative 2025 guidance. UBS anticipates fiscal 2025 EPS closer to $20, down from the earlier $22.50 consensus. Margins were also revised, with Medicare Advantage trimmed to 1.5% and Optum Health lowered to 4.5%.

Despite the recent shakeups, Wall Street hasn’t completely hit the panic button yet. Last month, UnitedHealth shook things up by axing broker commissions on select Medicare Advantage plans — a move aimed at trimming the cost that forced it to yank full-year guidance. Hightower Chief Investment Strategist Stephanie Link called it a smart pivot, saying the same issue “got them in trouble” to begin with. Link is bracing for short-term volatility but stays bullish long-term, calling UNH stock “too cheap” for a top-tier name in the industry.

There’s still optimism in the air, but with a touch of caution. UNH stock has a “Moderate Buy” consensus overall, down from a consensus “Strong Buy” rating a month ago. Of the 24 analysts covering the stock, 15 advise a “Strong Buy,” two suggest a “Moderate Buy,” and seven analysts play it safe with a “Hold.”

The mean price target of $363.43 implies shares could rise as much as 18%. The Street-high target of $440, way below this year’s highs, signals that UNH has an upside potential of 43% from current levels.

The U.S. healthcare industry, despite constant political firestorms, is built to endure. For years, UnitedHealth has stood as its crown jewel. Defensive, dividend-paying, and shock-resistant, it has been the kind of stock long-term investors can count on. But 2025 has shattered that illusion. While the broader market climbs to record highs, UnitedHealth’s dramatic plunge reminds us that even giants can stumble hard.

Sure, UNH stock now trades at a discount, offering an attractive dividend yield. Insiders are buying shares, and UnitedHealth still commands significant market share and robust cash flow. But is this really a “buy the dip” moment? It’s probably a bet that management can steady the ship, and the storm eventually clears.

Until then, UnitedHealth sits in a gray zone between legacy and uncertainty, where long-term promise collides with short-term pain. Investors should exercise caution before jumping in.

On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com