CVS Stock Slides on Walmart Exit

A pricing dispute with Walmart has CVS shares seeing red

Jan 15, 2019 at 9:56 AM
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Shares of CVS Health Corp (NYSE:CVS) are taking a hit this morning, after Walmart (WMT) said it will exit CVS-run pharmacy networks following a pricing dispute. CVS has requested the retail powerhouse continue to fill prescriptions as an in-network partner through April 30. According to the Wall Street Journal though, if Walmart doesn't agree, the split will occur in early February. At last check, CVS stock is down 3% to trade at $63.42.

It's been a rough couple of months for the pharmacy stock. Since its most recent rejection in the $81-$82 area in late November, the security has fallen more than 20%. The shares attempted to stage a rebound off their late-December lows near $62, but upside momentum stalled in the formerly supportive $69-$70 region.

However, even though CVS stock has underperformed the S&P 500 Index (SPX) significantly in the past two months, analysts remain devoted to the bullish camp. In fact, the equity boasts 12 "buy" or better endorsements, compared to four tepid "holds" and not a single "sell" rating. Plus, the consensus 12-month price target of $89.74 represents expected upside of roughly 40% to CVS' current price, and stands in territory not charted since late 2016. Should the stock extend its journey lower, a round of downgrades and price-target cuts could exacerbate selling pressure on the shares.

Echoing that, options traders are also bullish on CVS. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open nearly four calls for every put in the past two weeks. The resulting 10-day call/put volume ratio of 3.63 is higher than 90% of all other readings from the past year, pointing to a much healthier-than-usual appetite for bullish bets of late. An exodus of option bulls in the wake of CVS weakness could translate into an added headwind for the stock.

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