Raymond James cuts Cigna to Outperform on lack of near-term catalysts

Investing.com -- Raymond James downgraded Cigna Group to Outperform from Strong Buy and lowered its price target to $320 from $350, saying the health insurer's valuation remains attractive but near-term catalysts are lacking as growth moderates and its pharmacy benefit management (PBM) business faces ongoing headwinds.

The brokerage said Cigna operates in a mature market with slower growth than other names under its coverage and expects continued investments in the PBM transition, combined with limited customer growth, to weigh on earnings momentum over the medium term. While its specialty pharmacy business is offsetting some of the weakness, the PBM segment is tracking slightly below previous expectations.

Despite the downgrade, Raymond James maintained a positive stance on the stock, citing an undemanding valuation, with shares trading at about 8.3 times its 2027 earnings estimate and offering an estimated 13% free cash flow yield. The firm expects earnings growth to accelerate to around 10% in 2027 as PBM headwinds ease, the stop-loss business is fully repriced, and share repurchases increase.

The brokerage noted Cigna delivered a solid second quarter, reporting adjusted EPS of $7.78, topping consensus by $0.18, helped by stronger-than-expected performances at both Cigna Healthcare and Evernorth. The medical loss ratio of 84.5% also came in better than expected. Management modestly raised its 2026 adjusted EPS guidance to at least $30.45 from $30.35, while maintaining its medical loss ratio outlook.

Raymond James also highlighted that GLP-1 prescription volumes are expected to slow in the second half of 2026 as commercial coverage declines, though rising biosimilar and generic drug volumes in specialty pharmacy should partly offset that pressure. The firm continues to model 2026 adjusted EPS of $30.50, followed by $33.50 in 2027 and $37.00 in 2028.