CVS Health stock price analysis as Walgreens implodes

June 27, 2024 06:02 PM PDT | By Invezz

CVS Health stock price analysis as Walgreens implodes — Image source: Invezz

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

CVS chart by TradingView

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

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations, and video (Content) is a service of Kalkine Media LLC., having Delaware File No. 4697309 (“Kalkine Media, we or us”) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media.
The content published on Kalkine Media also includes feeds sourced from third-party providers. Kalkine does not assert any ownership rights over the content provided by these third-party sources. The inclusion of such feeds on the Website is for informational purposes only. Kalkine does not guarantee the accuracy, completeness, or reliability of the content obtained from third-party feeds. Furthermore, Kalkine Media shall not be held liable for any errors, omissions, or inaccuracies in the content obtained from third-party feeds, nor for any damages or losses arising from the use of such content. Some of the images/music that may be used on this website are copyrighted to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.
This disclaimer is subject to change without notice. Users are advised to review this disclaimer periodically for any updates or modifications.