Cigna (NYSE:CI) stock closed 2.1% lower on January 3 after the Wall Street Journal reported that the company is exploring the sale of its Medicare business. This marks a shift in the healthcare and insurance company’s strategy, which had previously focused on expanding in the fast-growing medical sector.
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Per the report, Cigna is in advanced talks with the Health Care Service Corporation. Moreover, the estimated valuation for the proposed transaction ranges between $3 billion and $4 billion. However, given the investors’ initial reaction to the announcement, this valuation seems relatively modest. It’s worth noting that Cigna’s Medicare business, recognized as Medicare Advantage, achieved revenues of $6.6 billion in the first nine months of 2023, indicating a year-over-year growth of approximately 9%.
The move follows Cigna’s failed merger deal with Humana (NYSE:HUM). Last month, Cigna dropped its merger plan following resistance from shareholders. The company then said it would focus on growing its presence in the health insurance sector via bolt-on acquisitions. Additionally, the company plans to allocate a significant portion of its cash for share buybacks in 2024 and has approved a new share repurchase plan worth $10 billion.
With this background, let’s look at the Street’s recommendation for Cigna.
Is Cigna a Good Stock to Buy Now?
Wall Street analysts are cautiously optimistic about Cigna stock. With seven Buy and seven Hold recommendations, Cigna has a Moderate Buy consensus rating. Meanwhile, analysts’ average price target of $365.33 implies 20.31% upside potential from current levels.
