Tag: MinuteClinic

CVS Finally Breaks Out

Posted on by Noah Kiedrowski

CVS Health (CVS) was not immune from the market declines inflicted by the COVID-19 downturn. Despite being in the traditional defensive healthcare space and confined to domestic operations, the stock could not break out and participate in the broader raging bull market post-COVID-19 lows. Despite a string of better than expected earnings, generating large amounts of free cash flow, paying down debt, and returning value to shareholders, the stock has up until recently been bogged down. The Aetna acquisition has been fully integrated while demonstrating robust earnings despite the COVID-19 backdrop. The company is finally getting some long-awaited respect on Wall Street, especially in conjunction with the positive vaccine developments. CVS has seen its stock rapidly appreciate as a function of strong company fundamentals and as a COVID-19 value rotation play. Despite the current stock appreciation, CVS still presents a compelling investment opportunity as the CVS-Aetna combination will drive shareholder value for years to come.

Perpetual Stock Slump

CVS has been in a perpetual stock slump with or without COVID-19 in the backdrop. CVS has been beaten down for years, plummeting by over 50% ($113 to $52) from its multi-year highs. Due to its recent breakout with strong company fundamentals and part of the COVID-19 value rotation, the stock has elevated to above $71. The company has posted a string of positive earnings with plenty of runway left in its growth from its Aetna acquisition. This was a bold and hefty price tag to pay yet necessary to compete in the increasingly competitive healthcare space, changing marketplace conditions, and political backdrop with drug pricing pressures. CVS made a defensive yet necessary acquisition to enable the company to go back on the offensive. The combination of CVS and Aetna was a bold and successful move after initial skepticism by investors. The CVS-Aetna combination will boost long-term growth prospects, restore growth, and fend off potential competition. This combination creates the first through-in-through healthcare company, combining CVS's pharmacies and PBM platform with Aetna's insurance business. The new CVS combines its existing pharmacy benefits manager (PBM) and retail pharmacies with the second-largest diversified healthcare company. Continue reading "CVS Finally Breaks Out" →

CVS Stock Slump Despite Aetna Catalyst

Posted on by Noah Kiedrowski

CVS Health (CVS) wasn't immune from the market declines that were inflicted by the COVID-19 downturn. Despite being in the traditional defensive healthcare space and confined to domestic operations, the stock has not been able to break out and participate in the broader raging bull market post-CVOID-19 lows. The combination of CVS Health (CVS) and Aetna was proving to be a success after initial skepticism by investors. CVS even posted a string of better than expected quarters in part attributable to the Aetna acquisition. CVS is generating large amounts of free cash flow, paying down debt, and returning value to shareholders in a variety of ways. To further boost long-term growth prospects, restore growth, and fend off potential competition, CVS combined with Aetna. This combination creates the first through-in-through healthcare company, combining CVS's pharmacies and PBM platform with Aetna's insurance business. The new CVS combines its existing pharmacy benefits manager (PBM) and retail pharmacies with the second-largest diversified healthcare company.

CVS has been in a perpetual stock slump with or without COVID-19 in the backdrop. CVS has been beaten down for years, plummeting by over 50% ($113 to $52) from its multi-year highs. The stock currently sits at a bleak ~$58 per share and struggling to hold on to any share price appreciation despite the positive string of recent earnings with plenty of runway left in its growth from its Aetna acquisition. This was a bold and hefty price tag to pay yet necessary to compete in the increasingly competitive healthcare space, changing marketplace conditions, and political backdrop with drug pricing pressures. CVS made a defensive yet necessary acquisition to enable the company to go back on the offensive. At current levels, CVS presents a compelling investment opportunity; however, it has been a value trap for years despite the company still being in the early stages of its CVS-Aetna combination, which will drive shareholder returns for years to come.

Challenging Backdrop

The pharmaceutical supply chain cohort, specifically CVS, has been unable to obtain a firm footing in the backdrop of consolidation within the sector, negative legislative undertones, drug pricing pressures, rising insurance costs, and a market that has lost patience with these stocks. These factors culminated in sub-par growth with a level of uncertainty as the sector continued to face headwinds from multiple directions. Many of the stocks that comprised this cohort presented compelling valuations in a very frothy market. This allure had been a value trap as these stocks continued to disappoint. It's no secret that these companies have been faced with several headwinds that have negatively impacted the growth and the changing marketplace conditions have plagued these stocks. Continue reading "CVS Stock Slump Despite Aetna Catalyst" →

Transformation Underway - CVS Health and Aetna Combination

Posted on by Noah Kiedrowski

The combination of CVS Health (CVS) and Aetna is proving to be a success after initial skepticism by investors. CVS has broken out recently due to a string of better than expected quarters, in part attributable to the Aetna acquisition. CVS is generating large amounts of free cash flow, paying down debt, and returning value to shareholders in a variety of ways. To further boost long-term growth prospects, restore growth, and fend off potential competition, CVS combined with Aetna. This combination creates the first through-in-through healthcare company, combining CVS's pharmacies and PBM platform with Aetna's insurance business. The new CVS combines its existing pharmacy benefits manager (PBM) and retail pharmacies with the second-largest diversified healthcare company.

This is a bold and hefty price tag to pay yet necessary to compete in the increasingly competitive healthcare space, changing marketplace conditions, and political backdrop with drug pricing pressures. CVS made a defensive yet acquisition required to enable the company to go back on the offensive. CVS had been beaten down for years, plummeting by over 50% ($113 to $52) from its multi-year highs. As of late, CVS has broken out to the mid $70s on the heels of its positive string of earnings. At current levels, CVS presents a compelling investment opportunity while the company is still in the early stages of its CVS-Aetna combination, which drives shareholder returns.

Challenging Backdrop

The pharmaceutical supply chain cohort, specifically CVS, has been unable to obtain a firm footing in the backdrop of consolidation within the sector, negative legislative undertones, drug pricing pressures, rising insurance costs, and a market that has lost patience with these stocks. All of these factors culminated into sub-par growth with a level of uncertainty as the sector continued to face headwinds from multiple directions. Many of the stocks that comprised this cohort presented compelling valuations in a very frothy market. This allure had been a value trap as these stocks continued to disappoint. It's no secret that these companies have been faced with several headwinds that have negatively impacted the growth and the changing marketplace conditions have plagued these stocks. Continue reading "Transformation Underway - CVS Health and Aetna Combination" →

Will CVS Health and Walgreens Survive?

Posted on by Noah Kiedrowski

Is it the single payer narrative being pushed by Democratic Presidential frontrunners? Is it the Amazon threat via its acquisitions of PillPack and Whole Foods that may displace traditional pharmacies? Is it the drug pricing pressures that are eroding margins and limiting margin expansion over time? Is it the secular decline in the physical footprint storefront retail space that’s hindering foot traffic and off-the-shelf purchases? Regardless of whether or not it’s singularly attributable to one of these factors or the culmination of all the aforementioned factors, CVS Health (CVS) and Walgreens Boots Alliance (WBA) are being pressured in many different directions. CVS and Walgreens have plummeted by 53% ($113 to $53) and 46% ($97 to $52), respectively from their multi-year highs. Over $110 billion in combined market capitalization has been erased from these two companies. With threats coming from all angles, will these two pharmaceutical supply chain heavyweights be able to not only survive but compete and revive their dominance in the marketplace?

Backdrop and Market Dynamics

The pharmaceutical supply chain cohort, specifically CVS and Walgreens, are simply unable to obtain firm footing in the backdrop of consolidation within the sector, negative legislative undertones, drug pricing pressures, rising insurance costs and a market that has lost patience with these stocks. All of these factors culminate into sub-par growth with a level of uncertainty as this sector continues to face headwinds from multiple directions. Many of the stocks that comprised this cohort presented compelling valuations in a very frothy market. This allure has been a value trap as these stocks continue to be a falling knife. It’s no secret that these companies have been faced with several headwinds that have negatively impacted the growth and the changing marketplace conditions have plagued these stocks. Continue reading "Will CVS Health and Walgreens Survive?" →

CVS - Earnings Implosion And Opaque Near-Term

Posted on by Noah Kiedrowski

The pharmaceutical supply chain cohort is simply unable to obtain firm footing in the backdrop consolidation within the sector, legislative backdrop, drug pricing pressures, rising insurance costs and a market that has lost patience with these stocks. All of these factors culminate into sub-par growth with a level of uncertainty as this sector continues to face headwinds from multiple directions. Many of the stocks that comprised this cohort presented compelling valuations in a very frothy market. CVS Health (CVS) was one stock that stood out as compelling value sitting, near multi-year lows in December of 2018. During the market rebound in January and February, CVS began to appreciate to new highs moving from $63 in mid-January to $70 in mid-February or an 11% move to the upside. Upon the release of its Q4 earnings, the narrative quickly changed as the transition to growth and Aneta integration is proving to be much slower than investors had anticipated, yielding an opaque situation near term for the stock. CVS has a healthy balance sheet and growing its dividend while seizing partnerships and acquisitions to propel growth into the future. It’s no secret that these companies have been faced with several headwinds that have negatively impacted the growth and the changing marketplace conditions have plagued these stocks. Regardless, until growth is restored and Aneta is fully integrated to yield a fully functional bumper-to-bumper healthcare colossus, the stock remains range bound. However, the long-term picture looks rewarding for value investors as growth initiatives and acquisitions bear fruit.

Market Challenges

The political backdrop has been a major headwind for the entire pharmaceutical supply chain (i.e., drug manufacturers, pharmaceutical wholesalers, and pharmacies/pharmacy benefit managers). Exacerbating the political climate, the drug pricing debate continues to rage on throughout political and social media circles weighing on the sector. This backdrop erodes pricing power and margins of drugs that ultimately move from drug manufacturers to patients with insurers and other middlemen playing roles in the supply chain web. Continue reading "CVS - Earnings Implosion And Opaque Near-Term" →