Severe headwinds in the drugstore market sent CVS Health (CVS) stock down from over $80 earlier this year to the $55 – $57 range. CVS stock broke out last week when traders speculated that Glenview Capital, an investor, wanted the firm to break up the company.
Glenview denied the report but markets reacted positively to the rumors. The firm will work with Glenview to strengthen its culture and operating performance. This would enhance value for CVS’s customers and shareholders.
On October 1, 2024, the media reported that CVS would cut 2,900 jobs. This restructuring would lower expenses as the overall business underperforms.
CVS Upgraded
TD Cowen raised its price target on CVS to $85, up from $59. It believes that updates to its Medicare Advantage improve its prospects. CVS cut over-the-counter benefits across its plans. In addition, enrollment for its four-star rated plans for 2025 increased by as much as 90%. As a result, the risk/reward profile is better for CVS stock.
CVS has better prospects than Walgreens Boots Alliance (WBA). The drugstore and Medicare businesses offer shareholders more diversification. Although WBA stock pays a higher dividend yield, this is unsustainable. Walgreens will likely cut its dividend to conserve cash. Conversely, CVS offers a sustainable dividend that yields around 4%.