Only Walmart ( WMT), with $573bn, Amazon, with $470bn, and Apple, with $366bn, generate higher revenue per annum as public companies.Īdmittedly, CVS' recent revenue growth has been generated by the mega-money acquisition of Aetna Healthcare, as opposed to organically, but we'll come to that later. Revenues, for example, have grown from $123bn in 2012, to $291bn in FY21, at a CAGR of 10% per annum. "The Good" primarily concerns CVS' very strong fundamentals. CVS - All That Is Good About This Healthcare Behemoth To begin with, however, let's celebrate all this is positive in relation to CVS Health. I would not necessarily argue that holding CVS shares long-term is a disastrous idea - it is just that an experienced investor with some appetite for risk-mitigation may look 2-3 years ahead, in the context of the headwinds in play for CVS, and prefer to be in a stock or a market that is more obviously future-proofed. In the rest of this post, I will attempt to enlarge upon these themes, and explain why, in CVS' case, the Bad and the Ugly marginally outweigh the Good, which is likely to damage CVS' share price over the next couple of years and drag it back down into $80 - $85 range again. Respectively, these 2 companies' share prices have fallen by 23% and 73% across the past 12 months. For context, look at the share price performance of arguably CVS 2 biggest rivals in the Retail segment - Walgreens Boots Alliance ( WBA) and Rite Aid ( RAD). And finally, the Ugly, which is the overall outlook for CVS' 3 core business divisions.Īttempting to modernize in an industry such as healthcare, which is notoriously resistant to change, most notably in the digital sphere, is no easy task. The Bad, which involves headwinds such as shrinking store numbers, falling COVID test revenues, stagnant organic growth, and thin profit margins. The Good, which involves CVS' strong fundamentals and sheer size. Broadly speaking, I think it's possible to break down CVS in 3 different ways. There are several pragmatic, non-contrarian reasons why I would take this position. (presentation)Īlthough that is superior to the performance of the S&P 500 over the same period -7% - and significantly better than a host of blue chip stocks - Apple ( AAPL), for example, which is +8%, Microsoft ( MSFT), +1.3%, Alphabet ( GOOG) ( GOOGL) 90+11%, Amazon ( AMZN) and Meta ( META), respectively -34% and -47% - and shareholders benefit from a CVS dividend yielding a quite reasonable 2.4%, I would still urge investors to consider selling CVS stock and reinvest elsewhere.
Nevertheless, at the present time, after a bearish few months, the share price is only 9% higher than when I made my bearish call.ĬVS share price performance past 12 months vs S&P 500. I was wrong on that count, as CVS shares kept climbing until January this year, when the stock traded at ~$109, an all-time high price for the company. I argued that, after a lengthy bull run from November 2020 to May 2021, a cooling off period ought to be expected, particularly as the share price momentum was largely created by pandemic tailwinds in the form of COVID testing revenues. I last posted on CVS Health Corporation ( NYSE: CVS) for Seeking Alpha almost exactly 1 year ago. Asbe/iStock via Getty Images Investment Thesis
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