UBS maintains Cigna stock Buy rating with $390 target

UBS reiterated a Buy rating on Cigna (CI) with a $390 price target following an investor event highlighting management's optimism and strategic positioning, particularly its exit from Medicare Advantage and focus on commercial healthcare, pharmacy benefit management, and specialty services. Cigna's new GLP1 program, aimed at expanding access to weight management treatments for Evernorth clients, was a key topic. Additionally, Cigna reported strong Q1 2025 earnings, exceeding estimates with an adjusted EPS of $6.74 and revenue of $65.5 billion, leading to an increased full-year EPS guidance of at least $29.60, though some analysts remain cautious about long-term growth due to limited exposure to government healthcare programs.

Analysis

Cigna's recent performance and strategic positioning present a compelling case, underscored by a strong first-quarter 2025 earnings report where adjusted EPS reached $6.74, surpassing the $6.35 consensus, and revenue hit $65.5 billion, exceeding the $60.38 billion forecast. This robust performance led management to raise its full-year 2025 EPS guidance to at least $29.60. UBS analyst AJ Rice reiterated a Buy rating with a $390.00 price target, reflecting confidence in Cigna's ability to achieve its low-double digit earnings growth objective over time, a sentiment supported by company management's optimism following an investor event. Key to this outlook is Cigna's strategic departure from the Medicare Advantage (MA) market, a move viewed positively as it allows focus on its commercial healthcare, pharmacy benefit management (PBM) through Evernorth, and specialty drug services, thereby sidestepping challenges in government-related healthcare. A significant development is the new GLP1 program, designed to expand access to these weight management treatments for half of Evernorth's client base currently not covering them, aiming for balanced cost-sharing and lower net costs. The stock, trading at $315.99 against analyst targets ranging from $330.60 to $407.00 and an InvestingPro Fair Value assessment suggesting undervaluation, exhibits attractive metrics with a P/E ratio of 17.35x and strong free cash flow yields. While most analysts, including Raymond James (target $385, Strong Buy) and Jefferies (target $397, Buy), have positively adjusted targets post-earnings, some, like Bernstein (target $373, Market Perform), express caution regarding growth potential due to limited government program exposure, despite the strong performance of its Evernorth and Healthcare divisions.

Key Decisions for Investors

• Investors should consider Cigna's robust Q1 2025 earnings, increased full-year EPS guidance, and supportive analyst ratings (e.g., UBS target of $390) as indicators of potential upside from its current trading price, especially given an InvestingPro fair value assessment suggesting undervaluation.
• Closely monitor the rollout and market reception of Cigna's new GLP1 program, as its success in expanding access and managing costs for Evernorth clients will be a significant factor for future earnings growth and competitive positioning.
• Evaluate the long-term growth implications of Cigna's strategic divestiture from Medicare Advantage, weighing the benefits of focusing on its commercial and specialty segments against the potential growth constraints highlighted by some analysts due to reduced exposure to government healthcare programs.