I am bullish on CVS Health Corporation (NYSE:CVS). The drop in CVS stock price this year (-13.5%) leads me to assume that the price drop is a potential opportunity to invest and profit in the following year.
CVS Stock Performance
CVS stock is up 8.35% in the last year and +24.4% in the last five years. The share price is currently down roughly 11% to $90. The decline began in mid-August when the high reached more than $108 per share. CVS stock Beta is 0.85, which is down from 1.13 one year ago. Low volatility is good news for retail value investors who dislike uncertainty.
I anticipate that the share price will continue to rise, with an average share price objective of more than $115 over the next 12 months. There will be a few missteps and falls. The present drop has been linked primarily to a probable Cano Health (NYSE:CANO) acquisition and other difficulties.
Throughout much of 2019, the share price fell into the low $50s. It came after the $69 billion acquisition of CVS and Aetna. Aetna was the third-largest provider of health insurance and services. I believe CVS stock will appreciate following the closing and absorption of CANO.
In my opinion, CVS will continue to experience solid momentum, better profitability, and revisions in the future, recession or no recession; shares are marginally cheap. CVS stock has little risk of falling. According to a flurry of research and analyses, healthcare and personal care products are high on consumer spending priorities.
What CVS Health Is Doing
CVS Health walk-in stores and services employ approximately 250,000 office and front-line employees. Over the last decade, the corporation increased its retail shop count from 5,474 in 2005 to 9,932 in 2021. CVS runs retail pharmacies and general merchandise stores in 49 states, the District of Columbia, and Puerto Rico.
Minute Clinics are urgent care walk-in clinics inside businesses that provide 125 treatments. Since their beginning, almost 50 million people have been evaluated and treated.
Another way CVS uses to extend its footprint is to partner with another top-tier store. At the outset of the pandemic, CVS purchased Target Corporation’s (NYSE:TGT) 1,672 pharmacies and clinics.
CVS provides pharmacy services, commercial and specialty insurance health plans, telemedicine care, chronic disease drug coverage, and destination deliveries.
Bottom Line
In recent weeks, the investment attitude in the retail pharma and health services industry has dipped.
If CVS stock falls more or meanders in the $90 present range for some time, investors can benefit from the safe 2.44% dividend yield or higher. The CVS ex-dividend date is October 20, ’22, and the results announcement date is slated to be November 2. I expect CVS stock to rise if it beats my EPS Q3 projection of $2 over the same quarter in FY 2021. Given the low payout ratio of roughly 25%, management may increase the dividend as an incentive to investors.
Keep in mind, though, that retail operations devour cash. CVS reported $53.4 billion in debt at the end of June, down from +$59 billion the previous year. The corporation has approximately $15 billion in cash on hand. CVS has a market cap of $116.19 billion. The company’s cash and debt are being used wisely, and its liquidity has little to no risk.
CVS is enhancing its digital capabilities to boost future growth. That costs money. They are investing $3 billion in improving their digital footprint to increase efficiency and personalize healthcare by modernizing their digital operations. During the epidemic, hits nearly tripled from 3.6 million to 9 million between September 2020 and January 2021. It was an increase of 13.77%. The +14.17% from mobile devices was even more astounding. The experience taught management a lot. In the three months ending June 30, 2022, 45 million digital customers visited CVS. Online prescription filling and delivery is the way of the future.
Featured Image – Megapixl © Rafaelhenriquepress
