There were those out there who believed that health insurance stock Cigna (CI) might try to buy its rival in the field, Humana (HUM). However, that was not to be, and there were already signs of that plan not being on the table for some time now. Nevertheless, the definitive answer from Cigna sent shares blasting up nearly 8% in Monday afternoon’s trading.
Cigna laid its cards out on the table, making it clear that it “…remains committed to its established M&A criteria and would only consider acquisitions that are strategically aligned, financially attractive and have a high probability to close.” Some believed that with an incoming Trump administration and the all but certain removal of current Federal Trade Commission commissioner Lina Khan, the probability of a deal closing would increase.
As for strategically aligned, the idea might have worked well. Cigna is mainly employer-focused, while Humana is more Medicare-focused. Given that Cigna was working to sell off its Medicare Advantage operations, however, it might not have wanted anything to do with that market to begin with, especially not buying a company that focused on it.
The Real Plan? Buybacks
However, as recently noted by CEO David Cordani, it was a safe bet that Cigna was not going to buy Humana to begin with. In fact, Cigna’s plan was to use its cash reserves to stage share buybacks. And those buybacks should be pretty substantial.
Its recent earnings report saw quarterly net income slip just a bit but still come in strong at $739 million, roughly $2.63 per share. That was due to a “…non-cash after-tax investment loss of $1 billion…” which connected back to VillageMD, the primary care provider it has a minority stake in.
Is Cigna Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on CI stock based on 13 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 19% rally in its share price over the past year, the average CI price target of $397.62 per share implies 15.25% upside potential.
