UPDATE: Citi Downgrades Centene

In a research note released Monday, Citi analyst Carl McDonald downgraded Centene CNC to Sell and set the price target at $65.00.

The firm stated, “The Optimist Thinks This Is the Best of All Possible Worlds, And The Pessimist Knows It to Be True.”

The firm continued to state that Centene primarily rose on speculation and that Ascension Health is not buying a publicly traded health plan. Ascension Health stated, “in the opinion of Ascension management, the purchase price would not be material.”

Citi continued by saying that the market isn't factoring in and discounting Centene's near-term earnings risk; furthermore, another near-term earnings risk was the negative impact of lower margins on the new business. This is because revenue from new markets will probably represent about 30 percent of Centene's revenue.

This was one of the strongest points in the report, as Citi said that it still really likes the long-term Medicaid growth story.

Shares of Centene are up nearly 23 percent year-to-date, but closed Tuesday at $72.35, down 4.41 percent.