CVS - CVS Health stock price analysis as Walgreens implodes
2024-06-27 21:02:00 ET
CVS Health (NYSE: CVS) stock price is imploding as concerns about the pharmacy business continue. It has already plunged by more than 43% from its 2022 highs and is hovering at its lowest point since November 2020.
Pharmacy woes are continuing
The pharmacy industry is not doing well as the biggest players in the industry face unprecedented competition and other challenges.
Rite Aid, the third-biggest pharmacy chain in the US filed for bankruptcy amid rising debt levels and slow growth.
On Thursday, Walgreen’s stock price fell apart as it crashed by over 30% after the company published weak results and warned of more store closings. This happened as its sales rose by 2.6% to $36.4 billion. It lowered its fiscal 2024 adjusted EPS guidance to between $2.80 and $2.95.
The company attributed the downgrade to challenging pharmacy industry trends and a worse-than-expected consumer environment. As a result, the Walgreens stock price has plunged by more than 80% from its all-time high.
Walgreens’s woes mean that the industry is going through unprecedented challenges and its attempts to turn around are not working. For example, Walgreens took a big $9 billion stake in VillageMD as it sought to move to the urgent and primary care chain. It then took a $6 billion writedown in March.
Walgreens earnings mean that CVS’s business is also slowing, which explains why its stock also dropped on Thursday. CVS’s pharmacy business is no longer growing while margins have continued thinning. Also, competition from the likes of Amazon, Dollar General, and Walmart has also intensified.
CVS’s buyout of Aetna is also showing some challenges. While Aetna helped the company during the pandemic, the trend has now reversed, forcing the company to slash its outlook twice. Costs in the division have soared and the company has warned that the recovery will take about 3 to four years.
The most recent results showed that CVS Health’s revenue in the first quarter rose to $88.4 billion while its cash flow from operations slowed to $4.9 billion from the previous $7.4 billion. It expects that its revenue this year will be $369 billion and its cash flow will be $10.5 billion.
I believe that CVS Health is at a better position than Walgreens, a company that has been in trouble for longer. However, with the industry sentiment waning, the stock will likely continue to underperform the market for a while.
CVS Health stock price forecast
The weekly chart shows that the CVS Health share price peaked at $104.05 in 2022 and has now crashed to $58.35. It formed a death cross pattern, where the 200-week and 50-week moving averages cross each other in August 2023.
The stock also dropped below the key support levels at $67 and $62.87 this year. $67 was a crucial level since it was the 61.8% Fibonacci Retracement point and the highest swing in November 2019. It also dropped below the key support at $62.87, its lowest point in December.
Therefore, the outlook for the stock is extremely bearish, with the initial level to watch being at $52.80, its lowest level in May.
The post CVS Health stock price analysis as Walgreens implodes appeared first on Invezz