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
-
How This Vanguard Emerging Markets Bond Fund Outperforms Its PeersThe Vanguard Emerging Markets Bond Fund took a cautious positioning at the start of the year, which has helped it beat the majority of its peers.
-
New Rules are Shaking Up the Real Estate Market. Here's What You Need to KnowBuyers and sellers have more room to negotiate commissions, and that could reduce home prices over the long run.
-
How This Vanguard Emerging Markets Bond Fund Outperforms Its Peers
The Vanguard Emerging Markets Bond Fund took a cautious positioning at the start of the year, which has helped it beat the majority of its peers.
-
Five Windows of Opportunity for Roth ConversionsWhen you convert a traditional IRA to a Roth IRA matters if you want to limit how much you pay in taxes.
-
Stock Market Today: Stocks Rise After Strong September Jobs ReportStocks were choppy Thursday as investors took in a higher-than-expected rise in jobless claims and strong growth in the services sector.
-
Strong September Jobs Report Puts Soft Landing in Sight: What the Experts Are SayingJobs Report A blowout reading on nonfarm payrolls takes another jumbo-sized cut to interest rates off the table.
-
Spirit Airlines Stock Plunges on Bankruptcy Buzz: What to KnowSpirit Airlines is one of the worst stocks Friday as reports swirl that the discount airline could file for bankruptcy.
-
Rivian Stock Sinks on Deliveries Miss, Production OutlookRivian stock is spiraling Friday after the EV maker reported dismal Q3 deliveries and cut its production outlook for the year. Here's what you need to know.
-
Tesla's Robotaxi Event: What Wall Street ExpectsTesla’s robotaxi event kicks off next week. Here’s what Wall Street expects to see and how analysts feel about the stock heading into the event.
-
Election 2024: Politics and Your PortfolioWho wins the White House matters — but only at the margins when it comes to your investment portfolio.
