CVS Shows Promise Despite Struggles in Health Sector
On Monday, CNBC’s Jim Cramer expressed an optimistic view about CVS, even as the overall health sector has encountered difficulties this year. He believes CVS is addressing significant issues in its business model, particularly in managed care. Cramer noted that there’s notable strength in other areas, particularly within its pharmacy operations.
Cramer touched on the challenges facing biopharma stocks, pointing out how drug makers are finding it tough to adjust, especially with changes under the Trump administration. He mentioned concerns about the impact of tariffs on pharmaceuticals, suggesting that companies in managed healthcare are also feeling the squeeze, needing to manage higher costs than anticipated.
Despite these setbacks, Cramer views CVS as a “port in the storm” for health-focused investors, with the company’s stock increasing over 58% recently.
Cramer’s assessment of CVS’ latest quarterly performance highlighted a positive trend. He contrasted it with last year’s multiple forecast reductions, emphasizing that in July, the retail pharmacy chain exceeded revenue expectations, leading to an improved outlook from management.
For Cramer, enhancing Aetna, CVS’s managed care division, is crucial. Although he notes that overall conditions aren’t booming, they are improving. Interestingly, he acknowledged that CVS is dealing with higher medical costs but seemed hopeful about the company’s trajectory.
A part of CVS’ recent success can be attributed to the decline of key competitors, which has allowed CVS to capture what he called “crazy” market share. He referred to Walgreens’ decision to go private earlier this year and the recent bankruptcy of Rite Aid, which has filed for the second time in two years.
Despite the stock’s rise from last year’s lows, Cramer characterized it as still undervalued. He insisted, “Even though the stocks have rebounded significantly from these levels, the numbers are still very cheap as they are rising.”
Comments from CVS’s CEO, David Joyner, underscored this optimistic performance. Referring to recent earnings, he highlighted ongoing operational and financial improvements, emphasizing the recovery at Aetna and strong performance at CVS pharmacies.
