What Happened?
Shares of health insurance company Cigna (NYSE:CI) fell 2.5% in the afternoon session after the company announced it will exit the Affordable Care Act (ACA) marketplace in 2027, which overshadowed a strong first-quarter earnings report.
Despite the healthcare giant exceeding revenue and profit expectations and raising its annual forecast, investors focused on the decision to leave the ACA market. This move is set to affect approximately 369,000 health plan members across 11 states.
Adding to the concerns was weakness within Cigna's pharmacy benefit manager operations. An analyst from TD Cowen described this as the “only blemish” in an otherwise solid quarterly report, noting that similar challenges had been seen at competitor companies. The negative news sent shares lower as the market weighed the strategic shift and divisional headwinds against the positive financial results.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Cigna? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Cigna’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 14.3% on the news that the company reported underwhelming third-quarter results.
Revenue grew 9.5% year-on-year to $69.75 billion, beating estimates by 3.6%. Adjusted earnings per share came in at $7.83, which was 2.5% ahead of the consensus forecast. However, the positive results were overshadowed by concerns about profitability and future growth. The company's operating margin declined to 3% from 4% a year ago, continuing a multi-year downward trend in profitability.
Additionally, while Cigna's full-year earnings guidance was in line with expectations, forecasts for revenue growth over the next 12 months point to a significant slowdown. This, combined with a slight dip in customer numbers from the previous quarter, likely prompted investors to look past the quarterly beat and focus on potential challenges ahead.
Cigna is up 1.8% since the beginning of the year, but at $284.11 per share, it is still trading 15.2% below its 52-week high of $335.18 from April 2025. Investors who bought $1,000 worth of Cigna’s shares 5 years ago would now be looking at an investment worth $1,127.
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