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Deutsche Bank analyst George Hill has downgraded the Cigna (CI +1.1%) to Hold from Buy, arguing that the health insurer lacks a catalyst to expand its multiple.
After declining more than 5% in the year so far, Cigna (NYSE:CI) is trading at ~10x in terms of forward earnings, with a ~23% discount to a five-year average of ~13x. Despite its Q4 beat, the company chose to set its 2022 guidance below consensus on Thursday.
The analyst also warns Cigna (CI) lacks exposure to end markets with a potential to generate a “meaningful” upside to earnings.
Noting that the company expects to achieve its ~10% earnings growth mainly through share buybacks, Hill calls the move “hardly an inspiring story.”
He points out that Cigna (CI) has lost share and members in Medicare Advantage (MA) market with an apparent increase in competition in both the commercial care market and pharmacy benefits management.
As the company expects to target the MA market again in 2023, the analyst has set a per share target of $236 for the stock to imply a premium of ~9% to the last close.
In response to a question on enrollment outlook in the MA market, Cigna (CI) CEO David Cordani said at the earnings call that the company expects its growth rate to accelerate in 2023 driven by higher customer satisfaction and new markets.
“So we’re looking forward to a very attractive growth opportunity for the Medicare Advantage portfolio of business in 2023,” he added.
