Will CVS Health fall apart soon? Here’s what we know

CVS Health Media reports show that (CVS) shares are losing on Tuesday’s session due to the news that the pharmacy chain’s management is conducting a strategic review of its operations.

CVS has hired bankers to help explore options, including potentially separating its retail and insurance businesses into two publicly traded companies, people familiar with the matter told Reuters. Talks are still at an early stage and no plans have been finalized.

A CVS spokesman declined to comment on the report but told Reuters the following:

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“The CVS management team and board of directors continually explore ways to create value for shareholders,” the spokesman said. “We remain focused on driving efficiencies and delivering high-quality healthcare products and services enabled by our unmatched scale and integrated model.”

The report comes as CVS faces pressure from activist investor Glenview Capital. According to The Wall Street Journal, the hedge fund recently took a significant stake in health care companies and met with CVS executives to propose changes to improve its operations.

Can CVS Health stock be bought, sold or held?

CVS Health’s problems weren’t just about fundamentals. Indeed, stocks have also underperformed on the price charts, with an 18% decline so far this year on a total return basis (price change plus dividends) compared to a 22% gain for the S&P 500. Still, Wall Street remains bullish on to shares of large-cap companies.

According to S&P Global Market Intelligence, The analyst consensus price target for CVS stock is $67.14, which represents an suggested upside of over 8% from current levels. Additionally, the consensus rating is Buy.

Financial services firm BofA Securities is among the companies that have a Buy rating on CVS stock with a $77 price target.

“CVS’s reported decision to conduct a strategic review would not be particularly surprising given the company’s recent execution problems,” says BofA Securities analyst Allen Lutz, who adds that he has mixed feelings about a potential breakup.

While under normal circumstances it would be reasonable “to assume that Aetna’s health plan could achieve a higher earnings multiple as a standalone business,” the insurer’s poor performance in 2024 “is a major factor in CVS’s weak stock price, and it is unclear how much investors would reward the company as an independent entity, especially for profits in the current or next year.”

Lutz believes Aetna’s earnings stabilization could “generate significant shareholder value” and “significant growth potential.”