CI Cigna: Initial Analysis 8/10/25

Why I think Cigna (CI) is a Buy at Current Levels

Disclosure: Topdown Equities ownership has a long position in CI stock

Cigna Group (NYSE: CI) is one of the largest health services companies in the United States, combining a substantial commercial health insurance business with a dominant presence in the pharmacy benefit management (PBM) industry through its Evernorth segment. After a steep drop in share price following its July 30 earnings release, the stock now trading at $274.90 and is down -0.45% year to date. I think this is a great time to build a position in the stock and I’m confident it’ll recover from the short term downturn over the next couple of years if not sooner. While the market has caused Cigna to sell off alongside its peers, the underlying business and the minimal exposure to Medicare and Medicaid suggest that the sell-off is overdone.

First, I’ll dive into the basics of Cigna’s business model and then what the most likely reasons are for the price dropping rapidly in the last two weeks. Cigna’s business model has two major revenue engines. First, its Cigna Healthcare segment provides commercial health insurance to employer groups and individuals, along with ACA insurance plans earning revenue primarily from premiums. Second, its Evernorth Health Services segment operates one of the largest PBMs in the U.S., generating income from managing prescription benefits, negotiating drug prices, dispensing specialty medicines, and offering health service solutions. Evernorth accounts for roughly 84–86% of total revenue, while Cigna Healthcare represents about 14–16% of revenue but delivers roughly 40% of total earnings due to its higher margins.

The sharp decline in Cigna’s stock since July 30 was triggered by the company reporting an 83.2% medical cost ratio in its insurance segment—signaling higher claims costs relative to premiums. This was part of a sector-wide concern that hit all major insurers, including UnitedHealth, Humana, and Elevance Health, as rising utilization rates (more doctor visits, elective procedures, and expensive drug use) pressured margins. However, unlike many competitors, Cigna is no longer exposed to Medicare Advantage or Medicaid, having sold those businesses in early 2025. That means it sidesteps some of the government reimbursement risks and overutilization trends that are hammering peers. In my view, this makes the recent sell-off unjustified. As Cigna raises premiums over the next few years—particularly in its commercial and ACA plans—these adjustments should offset cost pressures and expand profitability in the insurance segment.

Having covered the drivers of the business and the cause of the sell-off, I’ll take a look at the macro conditions of the market which very well could affect the Cigna price in the short term. The inflation data, particularly the Consumer Price Index, will heavily influence Federal Reserve policy, including the probability and magnitude of rate cuts this fall. A hotter-than-expected CPI could pressure equities, while a cooler reading could provide a tailwind. Other influential factors include the ISM manufacturing and services PMIs, consumer confidence data, movements in Treasury yields, and geopolitical risks such as U.S.–China trade tensions. Seasonal patterns also point to potential late-summer volatility in the S&P 500. I think the macro situation is somewhat neutral as I do think inflation will rise somewhat due to the implementation of tariffs but I also think the market will still factor in a rate cut. However if there is a steep fall in the SP 500 Cigna will be affected somewhat. 

Looking at the technical indicators, Cigna’s stock is in a transitional phase. The stock has fallen below the 200, 50 and 20 day moving averages but is close to the 20 day moving average which is $288.. The 20-day RSI sits around 37.5, in the neutral-to-bearish zone—indicating that while the stock is not deeply oversold, it is still trading at relatively depressed momentum levels. MACD readings are mixed, but short-term momentum indicators are showing early signs of stabilization. This technical setup suggests the stock may be bottoming and could see a short-term recovery if buying volume increases.

Furthermore, Cigna has delivered an approximate 11% annualized return over the last five years, reflecting a track record of steady shareholder value creation. In the 2025 year-to-date performance, the stock is hovering near 0% since the fall in price suggesting limited price appreciation has been captured so far this year. Among health insurers, I think Cigna stands out as the safest bet due to its minimal Medicare and Medicaid exposure, which shields it from some of the reimbursement and cost volatility plaguing the sector. Ultimately, despite the increase in healthcare usage, Cigna along with other insurers will be able to raise rates in 2026 and 2027 on their commercial and ACA plans and I don’t see an even greater increase in healthcare claims now that we are getting further past the pandemic. In addition to this, strong PBM earnings from Evernorth, and defensive sector characteristics create a favorable long-term setup. Once again, I think the potential upside on Cigna’s stock is much higher than the potential downside and recently multiple firms have reaffirmed a buy rating well above $300. Cigna’s recent sell-off is more about sector sentiment than its own business fundamentals. With its diversified revenue model, absence of Medicare/Medicaid risk, and ability to raise premiums in the coming years, I think Cigna is a solid stock to own that provides some diversification from the notable AI growth stocks that have fueled the SP 500's gains.