What Happened?
Shares of health insurance company Cigna (NYSE: CI) fell 14.3% in the morning session after 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.
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.
What Is The Market Telling Us
Cigna’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. Moves this big are rare for Cigna and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 8.5% on the news that the company reported underwhelming fourth quarter earnings. EPS in the quarter missed and its full-year EPS guidance missed significantly. This is due to higher-than-expected medical loss ratios. On the other hand, Cigna exceeded analysts’ revenue expectations this quarter. Overall, this was a softer quarter.
Cigna is down 6.6% since the beginning of the year, and at $256.33 per share, it is trading 25.3% below its 52-week high of $343.06 from November 2024. Investors who bought $1,000 worth of Cigna’s shares 5 years ago would now be looking at an investment worth $1,535.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
