Up by 80%, does the UnitedHealth Group have more upside?

The UnitedHealth Group stock price has embarked on a major rally in the past few months and has recently formed the encouraging golden cross pattern. UNH jumped to $420, its highest level since April 25. It has soared by 78% from its lowest level this year. 

Why UnitedHealth Group stock is soaring

UnitedHealth Group, the biggest health insurance company in the United States, is doing well this year. This is a sharp contrast to what happened last year when it became one of the top laggards in Wall Street. 

The stock has rebounded even after Warren Buffett’s Berkshire Hathaway sold all the shares in the first quarter. This rally is mostly because of a change of policy by the Trump administration.

In April, the US administration said that it would boost payments to Medicare Advantage plans next year. It will boost the payments by 2.48% to $13 billion, higher than the 0.09% that the CMS had proposed earlier this year. In a note at the time, a Morningstar analyst said:

"Final rates typically rise from initial rate notices, and we think investors appreciated that pattern remaining intact, despite the ongoing regulatory pressure on this end market.”

In addition to the UNH stock, other similar companies are doing well. CVS Health jumped to $103 on Monday, up sharply from last year’s low of $43.55. While CVS is known for its pharmacies, it is also a big name in the health insurance industry. Humana shares have soared by 135% from its lowest point this year.

UnitedHealth hiked its revenue estimates

The UNH stock price has also soared after the company published strong financial results. These numbers revealed that its revenue soared to $111.72 billion in the first quarter, higher than the expected $109.57. This revenue growth showed that the company was still seeing strong demand during the quarter, a move that will help the new management implement the turnaround.

Its earnings per share (EPS) rose $7.23 beating the analysts estimates of $6.57. Most notably, the company also boosted its forward estimates. It now expects that adjusted earnings will be $18.25 this year, while the annual revenue will soar to $439 billion. 

Analysts, on the other hand, predict that the revenue will jump to over $444 billion this year. These numbers explain why analysts are upbeat about its performance, with Bank of America hiking its target to $475 from the previous $450. Leetink Partners and Mizuho see the stock continuing rising.

UNH stock price technical analysis

UnitedHealth stock chart | Source: TradingView

The daily chart shows that the UnitedHealth Group stock has done well in the past few months. It has soared above the crucial resistance level of $381, the highest point in October last year. It was the neckline of the double-bottom-like pattern at $258. 

The stock has formed a golden cross pattern, which happens when the 50-day and 200-day moving averages cross each other. This pattern normally leads to more upside over time. 

The stock has also remained above the Ichimoku cloud indicator. Therefore, the path of the least resistance is upwards, with the next key target to watch being at $500.