Risk-Radar Alert: Analyst Acknowledges Cigna's Unrecognized Market Risk Hedge, Bestows Neutral Stance

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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