J.P. Morgan Weighs In on UnitedHealth Stock Amid DOJ Scrutiny
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Thursday's 5% drop was driven by renewed scrutiny over an ongoing legal matter. UNH disclosed that it had proactively reached out to the DOJ following a February Wall Street Journal report revealing a civil investigation into its Medicare Advantage risk-coding practices. In its latest filing, the company confirmed that it is now responding to formal civil and criminal inquiries, has launched its own internal review, and remains cooperative with CMS audits. UNH also pointed to a favorable March ruling from a Special Master in a separate, long-running DOJ civil case as a sign of how past challenges have played out.
This shift from 'unaware' in February to 'proactively cooperating' now isn't surprising to J.P. Morgan analyst Lisa Gill, who views the company's engagement as part of a broader defense of its practices.
'While we are not lawyers,' Gill noted, 'we note that if the court were to view this case similarly to previous ones brought forth by DOJ regarding the False Claims Act (FCA), we believe that this would place the burden of proof on the DOJ to prove improper coding.'
Though the investigation has added another layer of uncertainty, Gill contextualizes it within broader industry trends. The analyst points to risk-adjustment programs like RADV and regulatory updates like V28 as ongoing efforts to refine coding practices across the Medicare Advantage landscape. Viewed through that lens, the current probes may ultimately reflect how companies have adapted, rather than acted improperly.
Still, Gill acknowledges the ambiguity facing investors. The company's filing offers limited detail, and any legal proceedings stemming from the DOJ's inquiries are likely to be drawn out. Much could hinge on the outcome of the ongoing DOJ-backed civil case – one in which the Special Master recently recommended dismissal due to lack of evidence, though the DOJ has challenged that recommendation.
In the meantime, Gill is looking ahead to next week's earnings call for added clarity, and remains optimistic. The analyst assigns UNH an Overweight (i.e., Buy) rating and $418 price target, suggesting the stock could rebound by 48% over the next 12 months. (To watch Gill's track record, click here)
And she's not alone. 17 other analysts share Gill's bullish outlook, while 5 remain on the sidelines and just one is bearish. Altogether, the stock carries a Moderate Buy consensus rating. The average price target stands at $348.12, implying a ~24% upside from current levels. (See UNH stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights.
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