UnitedHealth Group shares surge 6.4% as analysts downplay DOJ risks

Shares of UnitedHealth Group Incorporated rallied sharply on May 16, 2025, closing 6.4% higher at $291.91. This rebound followed a period of sharp declines driven by regulatory scrutiny and leadership changes. The $264.8 billion healthcare behemoth, which had fallen nearly 48% year-to-date, found some respite after analysts suggested that ongoing investigations by the U.S. Department of Justice (DOJ) may not materially harm the company’s long-term earnings outlook.

Despite the dramatic recovery during Friday’s trading session, UnitedHealth’s stock remains under significant pressure in 2025. The stock had entered correction territory after sustained negative sentiment surrounding its Medicare Advantage billing practices, an abrupt CEO departure, and rising medical cost ratios. However, the latest analyst commentary appeared to offer a glimmer of stability, prompting institutional and retail investors to revisit their near-term bearish stance on the stock.

What Is the DOJ Investigating UnitedHealth Group For?

The DOJ probe centers around allegations that UnitedHealth engaged in systematic upcoding within its Medicare Advantage plans. According to reports first confirmed by The Capitol Forum and cited across U.S. media outlets, the agency is pursuing a criminal investigation into whether UnitedHealth improperly inflated risk scores to secure higher federal reimbursements.

This practice, known as risk score manipulation, has been a recurring theme in industry-wide probes. Medicare Advantage, a high-growth, privately administered arm of the federal Medicare program, has attracted increased regulatory scrutiny in recent years, especially amid concerns of fraud and billing inflation by major players.

While UnitedHealth has denied any wrongdoing and claimed it has not been formally notified by the DOJ of the investigation’s status, the report was enough to wipe out tens of billions in market capitalization. The uncertainty surrounding potential financial penalties, compliance costs, or operational disruptions has continued to weigh heavily on the stock since the initial news broke.

How Did the CEO Shakeup Affect Investor Sentiment?

Adding to market volatility, UnitedHealth Group announced earlier this month that CEO Andrew Witty would be stepping down effective immediately. His departure followed closely on the heels of the DOJ reports and spurred concerns about internal governance and crisis management within the company. In an unusual move aimed at shoring up investor confidence, former CEO Stephen Hemsley was reappointed to guide the company through its regulatory and strategic headwinds.

Hemsley is credited with expanding UnitedHealth’s reach across insurance and healthcare services during his previous tenure. His return was interpreted by some market participants as a stabilizing measure, with analysts suggesting that his familiarity with the business could help restore continuity and operational discipline.

What Is Driving Volatility in UnitedHealth’s Medicare Advantage Segment?

The regulatory spotlight on Medicare Advantage has come at a time when UnitedHealth’s health services arm, Optum, is also under pressure. The company revised its full-year 2025 earnings guidance during its Q1 results announcement, citing unexpected cost trends within its Medicare book.

UnitedHealth projected adjusted earnings per share of $26.00 to $26.50, trimming earlier forecasts due to higher-than-expected medical utilization rates. The company attributed these pressures to care intensity patterns that diverged from actuarial models used during prior forecasting cycles.

Higher care intensity not only affects margin predictability but also undermines UnitedHealth’s core value proposition in Medicare Advantage—managing cost-efficient, outcome-driven care delivery for an aging U.S. population.

How Has the Market Reacted to UnitedHealth’s Earnings Revision?

The initial reaction to the earnings revision was largely negative, as investors interpreted the guidance cut as a signal that UnitedHealth might be entering a period of prolonged margin compression. However, Friday’s price action suggested a degree of recalibration, with some analysts pointing to overdone selling and a potential overshoot in valuation decline.

At $291.91 per share, UnitedHealth still trades well below its 52-week high and reflects a valuation multiple significantly compressed from its historical norms. The stock’s trailing 12-month price-to-earnings ratio has fallen to 28.11, versus an average in the mid-30s range over the past several years. For long-term investors, this divergence may present a contrarian opportunity, especially if the DOJ investigation proves less disruptive than initially feared.

What Is UnitedHealth’s Broader Strategic Outlook for 2025?

Beyond the Medicare controversy, UnitedHealth continues to execute on strategic expansion across verticals through its Optum unit, which encompasses Optum Health, Optum Rx, and Optum Insight. The firm has made targeted acquisitions in digital health, home-based care, and analytics, aiming to consolidate its position as a diversified healthcare platform provider.

UnitedHealth remains one of the largest healthcare insurers in the U.S., with over 60 million members, and is often seen as a bellwether for the broader managed care industry. Its market leadership, scale, and data-driven operating model provide a strong structural advantage—though current headlines have temporarily clouded its fundamental thesis.

What Are Analysts and Institutional Investors Saying?

Following the steep selloff, several major sell-side institutions issued notes suggesting the risk may now be more balanced. Analysts at Wells Fargo and J.P. Morgan indicated that while headline risk remains, the lack of concrete DOJ action and the company’s stable earnings base could limit further downside.

There also appears to be renewed interest from institutional buyers looking to exploit the depressed valuation. According to recent trading disclosures, passive funds and long-term asset managers have incrementally added to their UNH positions, suggesting that the stock may have hit a short-term bottom. The move on May 16 was accompanied by over 22 million shares traded—five times its 3-month average volume—highlighting a resurgence in liquidity and investor engagement.

What Is the Future Outlook for UnitedHealth Stock?

While the immediate overhang from the DOJ investigation and management changes will likely persist in headlines, many analysts maintain that UnitedHealth’s core business remains intact. Its diversified business mix, resilient cash flow, and large-scale operating model are seen as strengths that could help the company navigate the current turbulence.

Going forward, investors will watch for additional clarity from federal regulators, particularly any disclosures on the DOJ probe timeline or settlement discussions. The next earnings cycle will also be critical in validating whether UnitedHealth’s revised guidance is a one-off or part of a broader cost inflation trend.

If the company can stabilize care utilization rates and contain regulatory fallout, there may be scope for share price recovery. The return of Hemsley as CEO, improved transparency, and a consistent capital return program could further rebuild investor trust over the coming quarters.