CVS Health (CVS) stock price continued its strong downward trend as the company’s woes accelerated. Most recently, it has dropped in the last three consecutive weeks, moving to a low of $46.60, its lowest level since March 2020. It has plunged by over 54% from its highest level in 2022, bringing its market cap to over $62 billion, lower than the $67 billion it spent to acquire Aetna.
Why is CVS falling apart?
CVS Health and other companies in the industry like Walgreens Boots Alliance and Rite Aid are going through a rough time.
While CVS Health’s top-line revenue is growing, its bottom line has continued to deteriorate. Its revenue has jumped from over $255.7 billion in 2019 to over $367 billion in the trailing twelve months.
CVS’s net profit in the TTM has moved to $5.01 billion, down from $8.3 billion in the last financial year.
Recently, however, the results showed that CVS Health’s revenue rose from over $89 billion and $95.4 billion. This revenue rose even as its products revenue fell from $61.29 billion to $59.6 billion.
CVS Health’s bottom line plunged, with the net income falling from $2.26 billion to $87 billion, mostly because of the rising restructuring charges.
CVS Health stock also plunged after Donald Trump warned that he would do away with Pharmacy Benefit Manager (PBM) in a bid to lower drug prices. This is notable since CVS owns Caremark, which is a leading player in the industry.
Still, the reality is that a US president does not have a lot of power to do that since it would need to pass both in Senate and the House of Representatives. In a recent note, the Pharmaceutical Care Management Association argues that doing that would lead to higher costs.
CVS Health has also seen substantial competition from companies like Walmart, Target, and even Amazon. It has also experienced substantial costs as wages rise.
Therefore, CVS is working to turn its business around and is even considering splitting Aetna, a company it acquired in a $67 billion deal.
All this has left CVS Health being a cheap company, with a forward P/E ratio of 9.30, lower than the sector median of 20.7 and the S&P 500 index’s 22. This means that CVS may stage a strong comeback next year.
Read more: Here’s why the CVS Health stock price may rebound in 2025
CVS Health stock price analysis
The weekly chart shows that the CVS Health share price has been in a strong bearish trend in the past few years. It has dropped from a high of $101.63 in 2022 to a low of $46.60. The stock has formed a series of lower lows and lower highs.
Most recently, the stock has dropped below the key support at $51.66, its lowest point in March 2024. By moving below that level is important because it invalidated the double-bottom pattern, a popular bullish sign.
The stock has moved below the 50-week and 200-week Exponential Moving Averages (EMA), a sign that bears are in control. Also, the Relative Strength Index (RSI) and the MACD indicators have all pointed downwards.
Therefore, technicals suggest that the CVS Health share price will continue falling in the near term. If this happens, the stock will continue falling and reach a low of $43.23, its lowest level in April 2019. A break below that level will point to more downsides, potentially to the next key support at $40.
On the flip side, a move above the key resistance level at $51.66, its lowest point on May 28, will invalidate the bearish view as it signals that there are more upside.
Read more: Why CVS Health stock could appreciate 35% from here
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