The CVS Health stock price rebounded to $48 on Monday, up 10% from its lowest in December. This rebound continued after the strong Walgreens Boots Alliance earnings, which pushed the stock up almost 50% from its lowest point in 2024. So, is the CVS stock a bargain at the current levels?
Walgreens Boots Alliance earnings
The main catalyst for the CVS Health stock price has been the ongoing developments at Walgreens, its biggest competitor in the United States.
Walgreens stock has risen after reports emerged that it was exploring a sale to Sycamore Partners, a leading player in the private equity industry. Such a deal would mark a big step for a company that was recently a blue-chip Dow Jones index member.
Walgreens then published better-than-expected results, showing that its revenue rose by 7.5% in Q1 ’25 to $39.45 billion. It closed 67 stores during the quarter and is on track to close about 450 more.
The management warned that the retail sector remained in a rough environment, which will impact its total sales. One reason for this weakness is the flu season, which was weaker than expected. That warning will also translate to CVS Health since the two companies have a near similar business model.
CVS Health earnings ahead
The developments at Walgreens Boots Alliance will impact CVS’s business ahead of its next earnings scheduled on February 12 this year.
The most recent results showed that CVS Health’s revenue rose by 6.3% in the third quarter to $95.4 billion. However, its operating income dropped to $2.55 billion from $4.46 billion, and its earnings per share fell from $1.75 to $0.07.
Analysts estimate the next quarter’s revenue will be $97 billion, a 3.43% increase from the same quarter a year ago. The highest estimate is $98.97 billion, while the lowest is about $95 billion.
The company’s annual revenue estimate is $371 billion, a 3.8% increase from the previous year. It will then make $386 billion in the next financial year.
The main challenge for CVS Health and Walgreens is its profitability as restructuring and labor costs rise. Analysts expect that its annual earnings per share will drop from $8.74 to $5.87. Just last quarter, its EPS dropped to $1.09 from $2.21 in the same period last year.
The other catalyst for the CVS Health stock price will be its strategy this year. One idea is whether management will opt to continue with its current business strategy or spin off its insurance business.
A spin-off would mark a big change for the company since it acquired Aetna for over $67 billion a few years ago. Today, the combined company is worth about $60.42 billion, meaning that Aetna would have a significantly small valuation. However, there are chances that investors would push the CVS stock price higher if the spin-off was announced, as it would leave a lean and profitable company.
Read more: Here’s why the CVS Health stock price may rebound in 2025
CVS Health stock price analysis
CVS chart by TradingView
The weekly chart shows that the CVS Health share price has continued its strong downward trend in the past few months. It crashed from a high of $101.65 in February 2022 to $44 in December.
The stock has formed a series of lower lows and lower highs. Most recently, it dropped below the important support at $51.78, its lowest swing in May last year. It remains below the 50-week and 100-week moving averages.
Therefore, the outlook for the CVS share price is bearish as long as it is below the 50-week moving average and the key resistance point at $51.78.
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