Analysts get more constructive on health insurers Cigna, Humana

In a research note to investors, Citi analyst Ralph Giacobbe added Cigna (CI) to his firm’s Focus List and made the stock a Top Pick as he sees 50% return potential in two years. Meanwhile, his peer at JPMorgan also called Cigna a top idea to own into the 2019 JPMorgan Healthcare conference and upgraded Humana (HUM) to Overweight after the recent pullback in the shares, and given Humana’s accelerating market share gains, its Medicare Advantage exposure and balance sheet.

CITI ADDS CIGNA TO FOCUS LIST: Citi’s Giacobbe added Cigna to his firm’s Focus List and made the stock a Top Pick. The analyst believes Cigna offers “compelling” value at current levels as it trades at a 27% discount to peers and a 20% discount to the market. Further, Giacobbe argued that the Express Scripts (ESRX) transaction, coupled with Cigna’s administrative services concentration and its “funding agnostic, transparent, aligned model,” should allow incremental opportunities for growth, particularly within the national account book. Overall, the analyst sees Cigna shares offering potential for 50%-plus return in the next two years. Citi has a Buy rating on Cigna’s stock. Meanwhile, JPMorgan analyst Gary Taylor told investors in a research note of his own that Cigna is his top short-term idea to own into the 2019 JPMorgan Healthcare Conference. The analyst anticipates Cigna at the conference will be prepared to provide “at least high-level combined-company proforma 2019 guidance.” Further, Taylor noted that he sees a “valuation catalyst” in the closing of the Express Scripts deal. The analyst reiterated an Overweight rating and $250 price target on Cigna’s shares.

JPMORGAN SAYS BUY HUMANA: In a research note to investors this morning, JPMorgan’s Taylor upgraded Humana to Overweight from Neutral and named the stock one of his best ideas for 2019. The analyst cited the “significant” recent stock pullback, accelerating market share gains, attractive Medicare Advantage exposure and a conservative balance sheet. Medicare Advantage demonstrated the most stable MLR during the Financial Crisis and should post strong relative earnings performance in a future recession, he added. The analyst also lowered his price target on the shares to $333 from $354.

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