UPDATE: ISI Group Upgrades Catamaran Corp. to Strong Buy, Lowers PT Following Recent Pullback

In a report published Monday, ISI Group analyst Michael Cherny upgraded the rating on

from Buy to Strong Buy, but lowered the price target from $68.00 to $62.00. In the report, ISI Group noted, “We are upgrading CTRX from Buy to Strong Buy following the recent pullback as we view the fears about NT growth rates as overdone. Shares of CTRX have retraced to pre-Cigna decision levels as investor concerns over the pace of accretion as well as potential distractions in the selling season have taken some momentum out of the stock. This is despite the single best possible outcome (in our view) for the Cigna relationship – a long-term agreement at a GM in the range of a typical health plan with no capital commitment upfront. We expect the company to be net share winners in this selling season as well as to carry the momentum of the Cigna agreement into the 2015 selling season (given that the PBM market tends to be highly momentum-driven). We have reduced our PT to $62.00, representing ~25x our FY14 EPS estimates, as we think the lack of visibility on the pace of new business wins could slow the multiple expansion opportunity. However, if CTRX is able to maintain the pace of new business wins that it had last year, we would argue for potential multiple expansion or the ability to carry forward the 25x multiple for out-year earnings.” Catamaran Corp. closed on Friday at $49.24.