Costs related to the COVID-19 pandemic are expected to be
severe.
George Budwell
(TMFGBudwell) Mar 18, 2020 at 5:00PM Author
Bio
What happened
UnitedHealth Group (NYSE:UNH) couldn't escape the market's
terrible day today. Shares of the large-cap diversified health management
company ended Wednesday down by 11.22%. Since the start of the year,
UnitedHealth has now shed approximately $76 billion worth of market
capitalization, or roughly 25% of its prior value. UnitedHealth and nearly all
large U.S. insurance companies are getting hammered this year, thanks to the
COVID-19 illness.
So what
Last week, UnitedHealth joined other major U.S. health insurers
by waiving the out-of-pocket costs for COVID-19 diagnostic tests for its
members. That's the correct course of action, given the scope of the outbreak.
But it will have a hefty impact on the bottom lines of U.S. health insurers in
general.
In fact, the market seems to
think that this deadly respiratory ailment will cost UnitedHealth tens of
billions of dollars when everything is said and done. That's a rather harsh
assessment to be sure, but COVID-19 is spreading like wildfire in the U.S. right
now. As such, the market's dire outlook may actually be warranted.
Now what
Should bargain hunters pounce
on this top health management stock? While there are still a lot of moving
parts with this COVID-19 pandemic, UnitedHealth's shares are now trading at
less than 1 time 2021 projected revenue. So there's a strong case to be made
here that perhaps this healthcare stock has fallen too hard, too
fast at this point. More downside could be on the way, but the bottom has to be
close at these levels. Hence, bargain hunters may indeed want to add this
beaten-down health insurance stock to their portfolios soon.
George Budwell has no position in any of
the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley
Fool has a disclosure policy.
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