- As a part of a broader coverage of 15 companies in the Healthcare Services sector, Cantor Fitzgerald initiated coverage on Cigna Corporation CI with a price target of $285 and a Neutral rating.
- The company’s valuation gets discounted by investors for long-term growth rate peer comparisons but doesn’t get credit for being a hedge against market risk over the next 12-24 months, the analyst tells in a research note.
- Cigna’s heavy commercial and PBM mix saves it from several headwinds flowing through the industry in 2023 and 2024 while positioning it to capitalize on the tailwinds in 2024-2026.
- The analyst writes that Cigna is not exposed to Medicaid, facing a 5-15% (5-14M) lives program shrinkage from redetermination over the next 18 months.
- Also Read: Biden Admin Finalizes Rule To Crack Down Deceptive Medicare Advantage Advertising.
- Peers need to capture 25-30% of lives into commercial to offset the losses, and most are counting this in their base case guidance.
- Cigna’s lack of Medicaid exposure also removes some political risk related to President Biden’s budget proposal with medical loss ratio (MLR) minimums and RX carved out in Medicaid.
- CI has minimal (5%) exposure to Medicare, a sector positioned for a challenging rate environment in 2024.
- Cantor says Cigna has greater than peer exposure to the biosimilar pipeline, where the company’s care management and smart benefit designs can drive significant savings for members and clients.
- Industry experts estimate there will be $100 billion of biosimilars hitting the market by 2025. Cigna estimates it could capture $30 billion, roughly in line with the current PBM market share, though the analyst sees upside potential.
- Price Action: CI shares are down 1.44% at $252.09 on the last check Friday.
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