CI - Cigna downgraded at Wells Fargo citing a balanced outlook for managed care

Cigna ( NYSE: CI ) traded lower on Tuesday as Wells Fargo downgraded its shares while favoring rivals Elevance Health ( ELV ), UnitedHealth ( UNH ), and Humana ( HUM ), despite citing a more balanced outlook for the group compared to the previous two years.

The analysts led by Stephen Baxter argue that managed care stocks outperformed in 2022 due to solid fundamentals and thanks to multiple macro tailwinds such as favorable impact from higher interest rates and lack of exposure to commodities.

“While we expect growth and fundamentals to generally remain attractive in 2023 even if the economic backdrop weakens, we believe relative valuations are unlikely to improve materially,” the analysts wrote.

Expecting managed care to come under pressure “if confidence for a soft landing builds or focus on the presidential election cycle intensifies,” the team favors companies with “differentiated” growth narratives, namely Elevance ( ELV ), UnitedHealth ( UNH ) and Humana ( HUM ). All three stocks have won Overweight ratings at Wells Fargo, with price targets at $557, $616, and $610, respectively.

However, the analysts see limited multiple expansion for Cigna ( CI ) after a sizable outperformance in 2022, as indicated in this graph. Downgrading the stock to Equal Weight from Overweight, the team also lowered its price target to $355 from $370.

Seeking Alpha contributor R.A. Moss wrote in October that risks to Cigna’s ( CI ) “earnings have been understated.”

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