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CI

Cigna

$188.61

0.75 (0.40%)

, ESRX

Express Scripts

$77.73

0.895 (1.16%)

10:34
08/07/18
08/07
10:34
08/07/18
10:34

Barclays sees upside for Cigna even with no deal as Icahn opposes merger

In an open letter to investors, Carl Icahn urged shareholders to vote against the $54B Cigna (CI)-Express Scripts (ESRX) deal, as he believes the former is "dramatically overpaying" for a company "facing existential risks on several fronts." Regardless of how the deal plays out, Barclays analyst Steve Valiquette still sees upside for Cigna in both merger vote scenarios. ICAHN SAYS CIGNA 'DRAMATICALLY' OVERPAYING: In an open letter to stockholders of Cigna, Carl Icahn said that the insurer is "dramatically overpaying for a highly challenged Express Scripts that is facing existential risks on several fronts." The billionaire investor went on to say: "Regulatory risk due to opposition to the highly flawed rebate system will likely lower Express Scripts' profitability dramatically... [The significant problem of prescription drug pricing in America today] is a critical issue that must be addressed and eliminating conflicting reward systems and over-earning middlemen is the logical first step. Competitive risk from Amazon [AMZN], arguably the strongest competitor in the world, will be an existential threat to PBMs like Express Scripts, possibly challenging their very existence. Express Scripts could lose more customers like Anthem [ANTM] as it ceases to be independent and certain large MCOs and affiliated plans do not wish to deal with a company which is owned by one of their competitors. With Cigna's likely standalone value today of $215 and Express Scripts' likely standalone value less than $60, it's a travesty to complete this deal. Paying an over 50% premium to a company whose very existence may be challenged is a potentially massive destruction of Cigna shareholder value." As an alternative, he believes Cigna should pursue a multi-year partnership with an existing PBM provider, potentially Express Scripts, while the industry resolves its structural challenges and while Cigna management "can further develop or acquire their own PBM capabilities optimized for the rapidly changing regulatory and competitive environment." He adds that "there may well not be a need for PBM capabilities once the landscape changes and/or Amazon and other competitors materialize." Icahn also thinks that if Cigna were to use the cash portion of the Express Scripts consideration and free cash flow to "aggressively" repurchase its own shares, this could "result in a Cigna target price of over $250 in a reasonable time frame." DEAL OR NO DEAL: Barclays' Valiquette pointed out in a research note to investors that Cigna's shareholders will vote on the company's proposed acquisition of Express Scripts on August 24, which he views as one of the last remaining major hurdles for the deal as the anti-trust risk stemming from the current review by the Department of Justice may now be low. Under a deal break scenario, Cigna should trade at a multiple relatively in-line to diversified peer Anthem, implying a fair value of $215, he contended. If the deal is approved, the analyst sees Cigna shares falling to $180 in the near-term. However, his sum-of-the-parts analysis yields a current fair value of $213 per share. As such, Valiquette sees upside potential on Cigna in both merger vote scenarios. The analyst reiterated an Overweight rating on Cigna's shares. PRICE ACTION: In morning trading, shares of Cigna have gained about 0.5% to $188.51, while Express Scripts' stock has advanced about 1% to $77.66.

CI

Cigna

$188.61

0.75 (0.40%)

ESRX

Express Scripts

$77.73

0.895 (1.16%)

AMZN

Amazon.com

$1,853.00

5.25 (0.28%)

ANTM

Anthem

$258.34

0.12 (0.05%)

  • 16

    Aug

  • 24

    Aug

  • 24

    Aug

  • 13

    Sep

CI Cigna
$188.61

0.75 (0.40%)

08/07/18
LEHM
08/07/18
NO CHANGE
LEHM
Overweight
Cigna shares have upside with deal or no deal, says Barclays
Barclays analyst Steve Valiquette sees upside in shares of Cigna (CI) no matter the outcome of the shareholder vote on August 24 relating to its proposed acquisition of Express Scripts (ESRX). Under a deal break scenario, Cigna should trade at a multiple relatively in-line to diversified peer Anthem (ANTM), implying a fair value of $215, Valiquette tells investors in a research note. If the deal is approved, the analyst sees Cigna shares falling to $180 in the near term. However, his sum-of-the-parts analysis yields a current fair value of $213 per share. As such, the analyst sees upside potential on Cigna in both merger vote scenarios. Valiquette keeps an Overweight rating on the shares.
08/03/18
RHCO
08/03/18
NO CHANGE
Target $244
RHCO
Buy
Cigna price target raised to $244 from $220 at SunTrust
SunTrust analyst David MacDonald raised his price target on Cigna (CI) to $244 and kept his Buy rating after its "strong" Q2 results showed a "sizable" earnings beat across its business lines and lower expected medical cost trends. The analyst also maintains his bullish view on the pending Express Scripts (ESRX) deal, stating that the potential benefits of the combination are underappreciated give the strong momentum of the latter heading into 2019. MacDonald contends that investors' merger related concerns are "misplaced" and also sees Cigna valuation as "compelling".
08/02/18
JPMS
08/02/18
NO CHANGE
JPMS
Overweight
Cigna holders unlikely to vote down Express Scripts deal, says JPMorgan
While Cigna (CI) shares have underperformed peers since the deal for Express Scripts (ESRX) was announced in March, shareholders are unlikely to vote down the transaction, JPMorgan analyst Gary Taylor tells investors in a research note after the Wall Street Journal reported that Carl Icahn has built a stake and will push for voting against the deal. The analyst admits the market is taking a more negative view, as Express Scripts' 16% spread to offer value widened to 25% yesterday. Taylor believes few shareholders have questioned the strategic rational of the merger. He believes, however, that some of Icahn's points could resonate with bears in the near-term. The analyst keeps an Overweight rating on Cigna.
08/02/18
SBSH
08/02/18
NO CHANGE
SBSH
Vote against Express Scripts deal 'somewhat shortsighted,' says Citi
Citi analyst Ralph Giacobbe believes a vote against Cigna's (CI) proposed acquisition of Express Scripts (ESRX), which the Wall Street Journal reported that activist Carl Icahn will push for, could prove "somewhat shortsighted given the changing and evolving healthcare landscape and the integrated offering and cash flow that a combined entity would generate to compete more effectively." The analyst says that regardless of the outcome, he remains positive on Cigna shares. The company's model should continue to drive growth without Express Scripts, and potentially enhance growth with the deal, Giacobbe tells investors in a research note. He keeps a Buy rating on Cigna.
ESRX Express Scripts
$77.73

0.895 (1.16%)

AMZN Amazon.com
$1,853.00

5.25 (0.28%)

08/03/18
BARD
08/03/18
NO CHANGE
Target $2100
BARD
Outperform
Amazon summit highlights long cloud growth runway, says Baird
After having attended the AWS Summit in Chicago this week, Baird analyst Colin Sebastian said his talks with several enterprise IT decision makers highlight Amazon's "clear advantage" in product breadth and go-to-market capabilities despite the fact that cloud services competition is "undoubtedly intensifying" from Microsoft's (MSFT) Azure and Alphabet's (GOOGL) Google Cloud Platform. Most large-scale enterprises are still in the early days of cloud migration, which bodes well for the long-term growth outlook for AWS along with Azure and Google Cloud, Sebastian concluded. He keeps an Outperform rating and $2,100 price target on Amazon shares.
08/06/18
MSCO
08/06/18
NO CHANGE
MSCO
Boeing, Tesla, Nvidia make Morgan Stanley 'key man risk' list
Morgan Stanley equity strategist Mark Savino noted that about 12% of CEO jobs among S&P 500 companies turned over in 2017, noting that this was the highest level of CEO departures since before the financial crisis. The 59 stocks of S&P 500 companies that had CEOs depart in 2017 underperformed the market by 11% over the next 12 months, or since the departure for instances that were less than 12 months ago, noted Savino. In cooperation with the firm's U.S. analysts, Savino and his team identified the companies in each sector they believe face the greatest level of "key man risk," which includes: Boeing (BA), Tesla (TSLA), ADT Inc. (ADT), Moody's (MCO), TransUnion (TRU), Arista Networks (ANET), Church & Dwight (CHD), Coca-Cola (KO), Monster Beverage (MNST), Coupa Software (COUP), Salesforce (CRM), FireEye (FEYE), MongoDB (MDB), Microsoft (MSFT), New Relic (NEWR), XPO Logistics (XPO), Hilton (HLT), Las Vegas Sands (LVS), Best Buy (BBY), Ulta (ULTA), Aflac (AFL), Athene Holding (ATH), Lincoln National (LNC), Arthur J. Gallagher (AJG), Chubb (CB), Amazon.com (AMZN), Activision Blizzard (ATVI), Facebook (FB), Alphabet (GOOGL), Apple (AAPL), Terex (TEX), Cleveland-Cliffs (CLF), Freeport McMoRan (FCX), FleetCor (FLT), Global Payments (GPN), Square (SQ), Jazz Pharmaceuticals (JAZZ), Cheesecake Factory (CAKE), Broadcom (AVGO), Nvidia (NVDA), Chegg (CHGG), DXC Technology (DXC), Medidata (MDSO), Pluralsight (PS), RealPage (RP), Shopify (SHOP) and T-Mobile (TMUS).
08/06/18
STFL
08/06/18
NO CHANGE
Target $202
STFL
Buy
Facebook added to Stifel Select List, Amazon removed
Stifel analyst Scott Devitt replaced Amazon (AMZN) with Facebook (FB) on the Stifel Select List, citing the strong year-to-date performance of Amazon shares, which he still likes and keeps a Buy rating upon. He believes Facebook expectations, and the shares, are appropriately set to allow for longer-term outperformance given the material reset that followed the company's "painful" Q2 update, Devitt tells investors. He maintains a Buy rating and $202 price target on Facebook.
08/06/18
LOOP
08/06/18
NO CHANGE
Target $55
LOOP
Buy
Etsy price target raised to $55 from $50 at Loop Capital
Loop Capital analyst Laura Champine raised her price target on Etsy (ETSY) to $55 and kept her Buy rating after its Q2 earnings beat and raised guidance. The analyst notes that while the stock price has already doubled year-to-date, its positive momentum is likely to continue after another update forecasting continued revenue growth. Champine also believes that her revenue growth forecasts may prove to be conservative, as Etsy's holiday promotional activity later this year is likely to increase seller count. The analyst contends that Etsy's seller fees at 5% are also an "excellent value" relative to eBay's (EBAY) 10% and Amazon's (AMZN) 15%.
ANTM Anthem
$258.34

0.12 (0.05%)

07/09/18
JPMS
07/09/18
NO CHANGE
JPMS
CMS suspension could save Molina, Centene hundreds of millions, says JPMorgan
The Centers for Medicare and Medicaid Services confirmed Saturday that it will at least temporarily suspend the healthcare exchange risk adjustment program. If true, the immediate effect is that this Fall Molina Healthcare (MOH) and Centene (CNC) would avoid paying hundreds of millions of accrued payments related to 2017, JPMorgan analyst Gary Taylor tells investors in a research note. He notes that Molina would avoid $912M in payments and Centene $677M, according to their annual filings. On the other side, Anthem (ANTM) would not collect an expected $400M-$500M receivable, Taylor adds, citing his estimate. The analyst believes the longer-term effect of suspension "would be possibly additional significant disruption/withdrawals/rate hikes in the individual market for 2018-19." 19. If permanently dismantled, Taylor estimates Molina could book a one-time $350M after-tax gain related to 2017, Centene no gain and Anthem a $320M after tax loss. In terms of recurring earnings power exposure to exchanges, the analyst believes only Molina could materially benefit.
07/09/18
BMOC
07/09/18
UPGRADE
Target $290
BMOC
Outperform
Anthem upgraded to Outperform at BMO Capital on strong earnings view
As reported earlier, BMO Capital analyst Matt Borsch upgraded Anthem to Outperform from Market Perform and raised his price target to $290 from $275, saying he expects the company to post strong earnings growth over the next 4-5 years and execute under the new CEO Gail Boudreaux. The analyst cites his recent meetings with the company which boosted his confidence in Anthem driving higher earnings from the realization of annual savings in pharmacy costs, its partnerships and new fee-based arrangements with other health plans, as well as a deeper penetration of its "massive" employer customer base through "aggressive cross-selling of specialty product". Borsch also expects the company to capture a "substantial share of the five-year pipeline of $80 billion in expected new Medicaid revenue".
07/09/18
BMOC
07/09/18
UPGRADE
BMOC
Outperform
Anthem upgraded to Outperform from Market Perform at BMO Capital

TODAY'S FREE FLY STORIES

BOLD

Audentes Therapeutics

$33.74

0.7 (2.12%)

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VNOM

Viper Energy

$38.06

-0.29 (-0.76%)

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SCPH

scPharmaceuticals

$4.94

-0.43 (-8.01%)

20:25
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  • 24

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MDT

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$90.06

-0.54 (-0.60%)

, TJX

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$101.68

1.33 (1.33%)

20:25
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Earnings
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$38.35

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BHP

BHP Billiton

$48.30

0.38 (0.79%)

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TGE

Tallgrass Energy

$26.23

0.63 (2.46%)

19:23
08/20/18
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Tallgrass Energy analyst commentary at MUFG »

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TLRY

Tilray

$35.91

5.2 (16.93%)

19:18
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  • 28

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LFL

LATAM Airlines

$0.00

(0.00%)

19:10
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Earnings
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MNOV

MediciNova

$8.99

-0.11 (-1.21%)

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HTZ

Hertz

$21.05

0.155 (0.74%)

, FN

Fabrinet

$44.00

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MELI

MercadoLibre

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IBKR

Interactive Brokers

$61.99

0.76 (1.24%)

18:43
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FINRA fines Interactive Brokers $5.5M for regulation SHO violations »

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MSFT

Microsoft

$106.87

-0.71 (-0.66%)

18:29
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  • 04

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GSB

GlobalSCAPE

$3.46

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  • 10

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BHP

BHP Billiton

$48.30

0.38 (0.79%)

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LII

Lennox

$225.37

2.76 (1.24%)

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GDI

Gardner Denver

$28.29

0.36 (1.29%)

18:10
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MMM

3M

$204.57

-0.24 (-0.12%)

18:09
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ETN

Eaton

$81.33

0.35 (0.43%)

18:05
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Initiation
Eaton initiated at Morgan Stanley »

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FLS

Flowserve

$51.51

0.16 (0.31%)

18:01
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Flowserve initiated at Morgan Stanley »

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ITW

Illinois Tool Works

$138.37

-1.05 (-0.75%)

17:59
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CFX

Colfax

$33.28

0.62 (1.90%)

17:56
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ALLE

Allegion

$86.97

0.26 (0.30%)

17:54
08/20/18
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Initiation
Allegion initiated at Morgan Stanley »

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CGNX

Cognex

$52.42

0.02 (0.04%)

17:53
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Initiation
Cognex initiated at Morgan Stanley »

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UTX

United Technologies

$135.14

0.73 (0.54%)

17:47
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17:47
Periodicals
United Technologies buys analytics firm Predikto, Dow Jones says »

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JCI

Johnson Controls

$38.73

0.48 (1.25%)

17:47
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Initiation
Johnson Controls initiated at Morgan Stanley »

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