CIGNA Corporation (CI) Stock Is Up After Declining Take-Over Bid

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CIGNA Corporation (NYSE: CI)

Last week, CIGNA Corporation stock started to soar after a rival healthcare company, known as Anthem Inc (NYSE: ANTM) attempted to take over the company with a bid of $47.5 billion. However, today, CI declined the offer; sending the stock even higher. So today, we’ll talk about why the offer was declined, what we’ve seen in the market so far as a result, and what we can expect to see from CI moving forward. So, lets get right to it…

CIGNA Corporation Declines Anthem Takeover Bid

As mentioned above, CIGNA Corporation was recently offered $47.5 billion in a takeover offer from Anthem. However, the company has declined. In an announcement, CI stated that the bid offered isn’t in the best interest of shareholders and highlighted antitrust concerns surrounding the idea of an acquisition. Following the announcement, The Street weighed in with a strong review of the company; offering the following…

We rate CIGNA Corp (CI) a Buy. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.”

How CI Reacted In The Market Today

Following the news that CI had rejected the takeover bid from ANTM, the company’s stock started to climb. Currently (12:04), CI is trading at $164.22 per share after a gain of 5.77% so far today. So, all in all, it’s clear to see that investors are happy with the company’s decision to decline the bid.

What We Can Expect To See Moving Forward

If you follow my work here or elsewhere, you know that I’m not a fan of taking the analysts word for it when it comes to investing decisions. It’s important to do your own research. Nonetheless, in this particular case, I think that The Street hit the nail on the head. The bottom line is that CIGNA is an incredibly strong company with incredibly strong products. They’ve proven their ability to grow revenue and we’ve seen a pretty strong performance from the stock historically. While profit margins are relatively low at the moment, the upside potential on CI stock far outweighs the downside risk in my opinion.

With that being said, it’s important to remember that price movements in the market are a series of overreactions. So, while CI is having a great day today, we’re likely going to see slight declines tomorrow before seeing slow, yet steady growth moving forward. So, in my humble opinion, now is the time to start looking for pull backs as buying signs.

What Do You Think?

Where do you think CI is headed and why? Let us know in the comments below!

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