Analyst Anne Baxter says she sees the extension of the entire relationship with a Cigna unit as a significant positive for American Healthways. She says much speculation over this relationship has occurred in the last several quarters, making American Healthways extremely volatile at times.
Baxter notes the new agreement, retroactive to Jan. 1, 2003, brings together diabetes, low back pain, asthma, and cardiac disease into one contract, and extends previous 3-year agreements into one 5-year agreement. She thinks there's additional opportunities for American Healthways to expand its relationship with Cigna.
Baxter raised the $30 target to $34, and reiterates her strong buy rating.