CVS Health (CVS) stock is lower in Tuesday's session on news the pharmacy chain's board of directors is conducting a strategic review of its business, according to media reports.
CVS has hired bankers to assist in exploring options, including the potential separation of its retail and insurance units into two publicly traded companies, people familiar with the matter told Reuters. The discussions are still in the early stages and no plans have been finalized.
A CVS spokesperson declined to comment on the report, but did tell Reuters the following:
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"CVS's management team and Board of Directors are continually exploring ways to create shareholder value," the spokesperson said. "We remain focused on driving performance and delivering high-quality healthcare products and services enabled by our unmatched scale and integrated model."
The report comes as CVS faces pressure from activist investor Glenview Capital. The hedge fund recently took a sizable stake in the healthcare stock and met with CVS executives to propose changes to improve its operations, according to The Wall Street Journal.
Is CVS Health stock a buy, sell or hold?
CVS Health's troubles haven't been solely on the fundamental side. Indeed, shares have underperformed on the price charts, too, down 18% on a total return basis (price change plus dividends) so far this year vs the S&P 500's 22% gain. Still, Wall Street remains bullish on the large-cap stock.
According to S&P Global Market Intelligence, the consensus analyst target price for CVS stock is $67.14, representing implied upside of more than 8% to current levels. Additionally, the consensus recommendation is Buy.
Financial services firm BofA Securities is one of those with a Buy rating on CVS stock, along with a $77 price target.
"CVS' reported decision to pursue a strategic review would not be particularly surprising given the company's recent execution issues," says BofA Securities analyst Allen Lutz, who adds that he has mixed feelings about a potential breakup.
While it could reasonable in a normal environment "to assume that the health plan Aetna could obtain a higher earnings multiple as a standalone business," the insurance provider's underperformance in 2024 "is the main driver of CVS' weak share price, and it is unclear how much investors would reward that business as a standalone entity, especially on current year or next year's earnings."
Lutz believes a stabilization in Aetna's earnings could "generate substantial shareholder value" and "significant upside potential."
Related Content
-
Stock Market Today: Dow Logs Longest Losing Streak Since AprilThe November Producer Price Index showed that inflation remains a tough beast to tame.
-
Why Uber Stock Is Volatile After GM's Cruise AnnouncementUber stock is swinging this week following news that General Motors is restructuring its Cruise unit. Here's what you need to know.
-
Stock Market Today: Dow Logs Longest Losing Streak Since April
The November Producer Price Index showed that inflation remains a tough beast to tame.
-
Why Uber Stock Is Volatile After GM's Cruise Announcement
Uber stock is swinging this week following news that General Motors is restructuring its Cruise unit. Here's what you need to know.
-
Why Adobe Stock Is Down After Its Earnings BeatAdobe stock is lower Thursday despite the tech giant beating expectations for its fiscal 2024 fourth quarter. Here's what you need to know.
-
Three Possible Tax Impacts for Retirees Under TrumpHow might a second Trump term affect your tax bill in retirement — or the inheritance tax bill for your heirs? This pro has three predictions.
-
What to Know About Leverage and Bitcoin's Meteoric RiseLeverage in the financial world can lead to astonishing success or a crushing collapse. How are investors using leverage to invest in bitcoin?
-
How Do You Know When It's Time to Change Financial Advisers?Sometimes a breakup is for the best. Here's how to handle 'the talk' and make the switch to a new professional who's a better fit for you.
-
Stock Market Today: Tech Stocks Rally as CPI Supports Lower RatesAn inline inflation report sealed the deal for a December rate cut and sent the tech sector soaring.
-
CPI Report Casts Doubt on Rate Cuts in 2025: What the Experts Are Saying About InflationCPI November Consumer Price Index data sealed the deal for a December rate cut, but the outlook for next year is less certain.
