Cigna shares ‘undervalued,’ analyst says

Cigna signage displayed at the company's headquarters in Bloomfield, Connecticut.

Ron Antonelli | Bloomberg | Getty Images
Cigna signage displayed at the company’s headquarters in Bloomfield, Connecticut.

Whether or not the pending acquisition by Anthem goes through, Cigna’s stock is undervalued, according to an assessment by Stifel Nicolaus.

The investment bank started coverage of the health-services organization with a “buy” rating Monday after the market’s close and set a $169 target for the shares, based on the current Anthem deal value.

Anthem agreed to acquire its health insurance rival in July for about $48 billion, which would create the country’s largest health insurer. The companies are trying to win federal approval for the merger, but there is plenty of speculation that the deal may have hit some snags. Among them are concerns the deal will cause health-care premiums to rise for consumers and businesses.

“We expect [Cigna] to continue adding strategic components that improve its competitive position, either as a stand-alone organization or as a component of ANTM,” Stifel said in a report.

The combination with Anthem is “unclear,” the investment company said. If the deal succeeds, Cigna will provide additional leverage in pharmacy management negotiation.

If it fails, Cigna will have some structural work to do, but the shares may “paradoxically” rise, according to the report. Stifel estimates the stand-alone company’s shares should trade at $155, which is still higher than its current market price.

In May, Anthem CEO Joseph Swedish told investors at the UBS Global Healthcare conference that he expected the deal with Cigna to close in the second half of this year. On Friday, the companies extended the merger deadline to Dec. 31, from June 30, according to a filing with the Securities and Exchange Commission.

Shares of Cigna rose more than 1.5 percent Tuesday. The company’s stock has fallen sharply this year, shedding about 15 percent.

Anthem shares, meanwhile, gained about 2 percent in Tuesday morning trading. The company’s stock has fallen this year, dropping more than 9 percent.

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