The Cigna Group’s (NYSE: CI) 35% rally that started last summer just hit a new high gear. While investors would have been spooked by the 20% slide from November into December, all that damage has since been undone, and then some. The managed healthcare and insurance giant has been rallying with the best of them since the turn of the year, and with the S&P 500 index already hitting new highs, Cigna is about to do the same.
It was only last week that the latest move started, when in advance of the company’s Q4 earnings, the team at Deutsche Bank upgraded their rating on Cigna stock. Having previously had it as a Hold, they moved it to a Buy on the back of the company’s decision to sell its Medicare business for $3.7 billion.
Bullish upgrades
Deutsche has more confidence in Cigna’s ability to hit its 2025 EPS estimates as a result of the sale, as the underperforming Medicare unit was seen to be a weight around the neck of the wider business. Upgrading the stock off the back of that news alone, when earnings were due out the next day, was a brave step to take, but one that was well justified shortly after.
Cigna topped analyst expectations for both revenue and EPS the following day and showed solid growth pretty much across the board. And looking even beyond the strong performance from last quarter, management is super bullish about the coming year. Their forward guidance was ahead of the consensus, always a good thing, and so sure are they when it comes delivering on this that Cigna’s leadership also increased their quarterly dividend.
This is a move not taken lightly, as the effect on a stock’s price from a cut dividend can be vicious, so a company only raises dividends when it knows it can sustain it indefinitely. For investors, it’s one of the most bullish signals out there, and it’s not surprising that Cigna shares have reacted the way they have. At the close of Tuesday’s session, they were a mere 4% move from topping 2022’s all-time high, and you have to be thinking they’re good value to do business here before too long.
Equities as a whole are enjoying some of their best weeks in years as the risk-on sentiment continues to build alongside expectations of an end to the interest rate hikes. While any stock lacking a serious headwind will do well in such an environment, those already operating at a high level, like Cigna, will do even better.
Great expectations
Using MarketBeat’s research tools, we can see that expectations are high across the board for Cigna to extend its current rally to new highs in the short term. Just this week, the teams at Mizuho, Cantor Fitzgerald, and RBC upped their rating on Cigna stock, with price targets extending as far as $372. From where shares closed on Tuesday, that’s pointing to a further upside of more than 10%, and were Cigna shares to hit that in the coming weeks, they’d be well above 2022’s high of $340.
Technically, the setup remains bullish but not overly so. With the rally of the past few weeks having sent so many stocks to fresh highs, many are already in overbought territory and getting frothy. Not so with Cigna, whose relative strength index (RSI) is at a warm 70, which suggests that while momentum is still very much with the bulls, there’s also a ton more room for it to run from current levels.
Our suggestion? Get excited about this one, and get excited fast. In many ways, Cigna has been in a multi-decade rally, almost never setting lower lows during downturns. With shares on the cusp of breaking into blue-sky territory, it doesn’t look like that’s going to change anytime soon.
