TLDR;
This video discusses the recent drop in UnitedHealth (UNH) stock price following their Q4 2025 earnings report and revised guidance. It examines the reasons behind the stock's decline, including lower-than-expected revenue guidance and increased medical care ratio. The video explores whether the stock presents a turnaround opportunity, analyzes the impact of proposed Medicare rate changes, provides an intrinsic value assessment using various valuation methods, and highlights insider buying activity as a positive signal.
- UNH stock plummeted 16% due to soft revenue guidance and a rising medical care ratio.
- Despite challenges, there are signs of a potential turnaround with cost ratios peaking.
- Intrinsic value analysis suggests potential upside, especially with long-term holding.
- Insider buying indicates confidence in the company's future prospects.
UNH Stock Down 16% After Earnings [0:00]
The video introduces the significant drop in UnitedHealth (UNH) stock price, down 16% in pre-market trading, and outlines the key areas to be covered. These include the recent earnings report, the impact of flat Medicare rates, potential signs of a turnaround, and an updated intrinsic value assessment. The host notes positive indicators such as Berkshire Hathaway's investment and insider buying activity, suggesting potential opportunities despite the negative news.
UNH Stock Q4 2025 Earnings Update [1:04]
UnitedHealth's Q4 2025 earnings revealed a slight earnings beat but a soft revenue guidance, causing the stock to decline. Earnings per share (EPS) was $2.11 versus $2.1 expected, while revenue was $113.2 billion versus $113.82 billion expected. The company anticipates 2026 revenue to exceed $439 billion, a 2% year-over-year decline, falling short of the $454.6 billion analysts had projected. A key concern was the medical care ratio, which rose to 88.9% in 2025 from 85% in 2024, indicating higher-than-expected costs for patient care. This revenue decline marks a first in the company's history, contributing to investor unease.
UNH Stock - Is It a Turnaround Play? [2:54]
Despite the challenges, there are indications that UnitedHealth could be a turnaround play. The company's outlook suggests margin stability and growth across its four operating segments, aligning with its long-term strategy. The medical care ratio is expected to improve slightly to 88.8% in 2026, a 30 basis point improvement from 2025, signaling a potential peak in costs. Similarly, the operating cost ratio is projected to decrease by 10 basis points. The host suggests that the market may be overreacting by pricing in a worst-case scenario, potentially making it a favorable time to invest.
UNH Stock Plunges on MediCare Rates [4:16]
The U.S. government proposed a minimal 0.09% average rate increase for Medicare Advantage plans, leading to a significant drop in UnitedHealth's stock price. The analysis reveals that Medicare revenue accounts for approximately 38% of UnitedHealth's total revenue, amounting to $171.3 billion in 2025. A 5% reduction in Medicare revenue could result in an $8.5 billion loss. The host argues that the market's reaction is exaggerated, considering the proposed rate change is not yet final and medical care rates are likely to increase over time. This short-term setback is viewed as a potential opportunity for long-term value investors.
UNH Stock Intrinsic Value [6:35]
The video provides an intrinsic value assessment of UnitedHealth stock using price-to-earnings (P/E), price-to-sales (P/S), and price-to-free cash flow ratios, along with a discounted cash flow (DCF) model. Based on P/E ratios, the analysis estimates a 2026 intrinsic value of $371 in a normal case scenario, with a potential downside risk of -30% in the worst case and an upside of 64% in the best case. The P/S ratio suggests a downside risk of 17-18% and a potential upside of 27-34% in 2027. The free cash flow analysis presents a more pessimistic view with a downside risk of 65%, although this is based on conservative free cash flow estimates. The DCF model yields an intrinsic value of $232 with a margin of safety, but this could increase to $390 with more optimistic free cash flow assumptions.
UNH Stock - Insiders Are Buying [10:39]
The video highlights significant insider buying activity as a positive indicator for UnitedHealth's future prospects. Multiple insiders have been purchasing substantial amounts of stock, including transactions of half a million, one million, and five million shares. This widespread insider buying, coupled with Berkshire Hathaway's investment, suggests confidence in the company's strong moat and long-term potential. Despite current challenges and potential headwinds in 2026, the host believes that costs are peaking and UnitedHealth is a good investment opportunity for those with a 3-5 year investment horizon.
