Should You Buy UnitedHealth Group Stock After Its Steep Sell-Off?

Core Viewpoint - UnitedHealth Group's stock experienced a significant decline of 20% following the announcement of its Q4 results and 2025 guidance, despite better-than-expected earnings, primarily due to disappointing Medicare Advantage rate proposals from CMS [1][2]. Group 1: Stock Performance and Market Reaction - UnitedHealth Group's share price is down over 50% from its late 2024 peak, closing at $293.98 after a 3.99% increase on the day of the report [1]. - The stock's market capitalization stands at $266 billion, with a trading volume of 1.2 million shares [2]. Group 2: Medicare Advantage Rate Impact - The proposed increase in 2027 Medicare Advantage rates by CMS is only 0.09%, which is significantly lower than the anticipated 4% to 6% increase, leading to a sharp decline in UnitedHealth's stock [2][3]. - Other health insurance stocks were also affected, with Humana's shares dropping 22% and CVS Health's stock falling nearly 14% following the CMS announcement [3]. Group 3: Company Leadership Insights - Timothy Noel, CEO of UnitedHealthcare, expressed concerns that the CMS rates do not accurately reflect medical utilization and cost trends, indicating potential significant benefit reductions [4]. - CEO Stephen Hemsley projected modest growth for 2026, with expectations of low double-digit earnings growth in 2027 and a return to historical growth levels by 2028, maintaining long-term growth rates of 13% to 16% [7]. Group 4: Future Outlook - The initial sell-off of UnitedHealth Group's stock may have been overdone, as Medicare Advantage accounts for only about 15% of its total medical membership, suggesting the financial impact may not justify a 20% decline in valuation [5]. - Analysts suggest that the proposed CMS rates could be revised upward, with a potential 2.5% increase being hinted at, which would be more favorable for UnitedHealth Group [6].