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CVS Health Corporation (CVS), headquartered in Woonsocket, Rhode Island, provides health solutions, including health care and retail pharmacy services. With a market cap of $70.9 billion, the company offers prescription medications, beauty, personal care, cosmetics, and health care products, as well as pharmacy benefit management (PBM), disease management, and administrative services.
Companies worth $10 billion or more are generally described as “large-cap stocks,” and CVS effortlessly fits that description, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the healthcare plans industry. CVS’ ability to offer a comprehensive suite of services creates a seamless healthcare experience for consumers, allowing it to leverage cross-selling opportunities and synergies, leading to increased access to care, improved health outcomes, and reduced healthcare costs. The acquisitions of Signify Health and Oak Street Health further enhance CVS’ integrated model, positioning the company as a leader in value-based care.
Despite its notable strengths, CVS slipped 31.6% from its 52-week high of $83.25, achieved on Jan. 8. Over the past three months, CVS stock has declined 5.5%, underperforming the Health Care Select Sector SPDR Fund’s (XLV) 6% gains during the same time frame.
In the longer term, shares of CVS plummeted 27.9% on a YTD basis and have dipped 13.5% over the past 52 weeks, significantly underperforming XLV’s YTD gains of 14.2% and 17.9% returns over the last year.
To confirm the bearish trend, CVS has traded below its 50-day and 200-day moving averages since early April, with some fluctuations lately.
CVS has faced challenges in its health insurance business due to increased medical expenses and higher patient utilization rates, contributing to its underperformance. Moreover, changes in the regulatory environment, reductions in financial guidance, and competition in the healthcare industry have also influenced CVS’ performance.
On Sep. 10, CVS shares fell more than 2% after Leerink Partners released a report indicating that Medicare Advantage plans might struggle to achieve high-quality “star ratings” necessary for bonus payments.
On Aug. 7, CVS shares closed down more than 3% after reporting its Q2 results. Its adjusted EPS of $1.83 beat Wall Street expectations of $1.74. The company’s revenue was $91.2 billion, falling short of Wall Street forecasts of $91.6 billion. CVS expects full-year adjusted EPS to be between $6.40 and $6.65.
In the competitive arena of healthcare plans, UnitedHealth Group Incorporated (UNH) has taken the lead over CVS, showing resilience with a 13.8% uptick on a YTD basis and a solid 24.6% gain over the past 52 weeks.
Wall Street analysts are moderately bullish on CVS’ prospects. The stock has a consensus “Moderate Buy” rating from the 24 analysts covering it, and the mean price target of $67.69 suggests a potential upside of 18.9% from current price levels.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
