UnitedHealth stock jumps 78% after Medicare Advantage boost

UnitedHealth Group shares climbed about 78% to $420, reaching their highest level since April 25 after the U.S. announced higher Medicare Advantage payments and the company reported stronger-than-expected first-quarter results. Berkshire Hathaway sold its entire stake in the first quarter prior to the rally.

In April, the administration set Medicare Advantage payment rates for next year 2.48% higher than the previous year, adding roughly $13 billion to plan reimbursements. That rate is substantially larger than the 0.09% increase that had been proposed earlier by the Centers for Medicare & Medicaid Services.

UnitedHealth reported first-quarter revenue of $111.72 billion, above analysts’ consensus of $109.57 billion, and adjusted earnings per share of $7.23, compared with estimates near $6.57. The company raised its full-year adjusted earnings forecast to $18.25 and projected annual revenue around $439 billion; some analysts model annual revenue above $444 billion.

A Morningstar analyst wrote that final Medicare Advantage rates often rise from initial notices and that investors appeared to factor that pattern into their responses despite regulatory scrutiny of the market.

Several Wall Street firms updated their views after the earnings report. Bank of America raised its price target to $475 from $450. Other firms, including Leetink Partners and Mizuho, indicated the stock could see additional gains based on the policy change and the company’s results.

Technical indicators have also been cited by market participants. The stock moved above a prior resistance near $381, cleared a neckline associated with a previous double-bottom pattern around $258, and the 50-day moving average crossed above the 200-day moving average, a pattern some traders refer to as a golden cross. The share price has remained above the Ichimoku cloud indicator and some analysts point to $500 as a subsequent reference level.

Names with exposure to Medicare Advantage and related health services have similarly recovered from earlier lows. CVS Health rose to about $103 from a low near $43.55, and Humana shares are up roughly 135% from their lowest point this year.

Investors are watching upcoming regulatory announcements, future quarterly results and analyst revisions for further signals on the sustainability of recent gains.