What Does CVS Health’s Newly Added Risk Factor Tell Investors?


This article was originally published on TipRanks.com

CVS Health (CVS) is a U.S. pharmacy chain and pharmacy benefits manager. It also offers health insurance products. With a workforce of more than 300,000 people, including physicians and nurses, the company says it delivers care like no one else and that it helps people navigate the healthcare system.

CVS Health’s earnings report shows revenue increased 10% year-over-year to $73.8 billion in Q3 2021. The company posted adjusted EPS of $1.97, rising from $1.66 in the same quarter last year and beating the consensus estimate of $1.78. CVS Health distributed $659 million in dividends to shareholders during Q3. For full-year 2021, the company has raised its adjusted EPS target to a range of $7.90 to $8.00. It previously anticipated adjusted EPS in the band of $7.70 to $7.80.

With this in mind, we used TipRanks to take a look at the newly added risk factor for CVS Health.

Risk Factors

According to the new TipRanks Risk Factors tool, CVS Health’s main risk category is Ability to Sell, representing 24% of the total 49 risks identified for the stock. The company recently updated its profile with a new risk factor under the Ability to Sell category.

CVS Health informs investors that it plans to enter public health insurance exchanges in eight states from January 2022. It has developed and acquired the technology and talent necessary to engage public exchange customers. However, the company says that participating in public exchanges will require it to respond to actions taken by regulators and competitors and that such could reduce its profit margins. For example, it mentions that its public exchange competitors may be better at marketing to consumers and faster at launching products.  It also says that competitors may target its higher-margin businesses. Therefore, CVS Health cautions that it may be unable to compete successfully on public exchanges and that the products offered may not deliver the desired profitability.

The Ability to Sell risk factor’s sector average is 17%, compared to CVS Health’s 24%. CVS Health’s shares have gained about 47% since the beginning of 2021.

Analysts’ Take

Goldman Sachs analyst Nathan Rich recently initiated coverage of CVS Health stock with a Buy rating and assigned it a price target of $121. Rich’s price target suggests 20.34% upside potential.

Consensus among analysts is a Strong Buy based on 17 Buys and 3 Holds. The average CVS Health price target of $113.15 implies 12.53% upside potential to current levels.

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