CVS Health: Not Expensive For What It's Worth

CVS Health: Not Expensive For What It’s Worth


CVS will be closing 900 of its physical stores over the next three years while revamping some of its stores to better cater to the local community’s needs.

The company is also increasing its digital presence through virtual healthcare, online retail pharmacy, amongst others.

CVS increased its FY2021 revenue guidance to reflect its robust revenue growth cadence.

We discuss whether investors should add CVS stock now.

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CVS Health Corporation ( CVS ) is one of the leading health services providers in the US. The company offers pharmacy services to the retail, business, Medicaid, and insurance segments. These services include mail-order dispensing and online retail pharmacy. CVS also offers retail services, including over-the-counter drugs, consumer health products, and personal care products. Beyond that, CVS also offers its healthcare and other ancillary services through MinuteClinic walk-in medical clinics. As of December 2020, CVS has approximately 9.9K retail stores and 1.1K MinuteClinics.

Over the next three years, CVS will be closing over 900 of its physical stores . As part of its long-term strategy, CVS has also been ramping up its digital presence with the launch of Aetna Virtual Primary Care , which will complement in-person CVS’ MinuteClinic and HealthHUB locations.

CVS guided for FY2021 revenue of between $286.5B and $290.3B, representing an 8.36% YoY increase. The guidance has also been slightly revised upwards from prior estimates in FQ2’21 .

We discuss whether investors should add CVS stock now. CVS Increasing Its Digital Presence While Revamping Its In-Person Services

CVS has observed new consumer preferences for enhanced health services for common ailments and chronic care. This trend has been further observed during the COVID-19 pandemic as more and more Americans go to their local pharmacy chains for testing and medical advice. CVS has been encouraging hybrid models of medical care during the pandemic, with delivery services or curbside pickup through online purchases or virtual medical appointments. Currently, the company has more than 35M digital customers with 70% in CVS’s text messaging program. Furthermore, these local pharmacies have been instrumental in administering the Covid-19 vaccines across the communities within the US. CVS alone has administered 43M vaccines and 38 million COVID-19 tests. The company also expects to administer vaccine boosters and pediatric vaccines in FQ4’21.

To improve its community relevance and store efficiency, on 18 November 2021, CVS announced the closure of 900 physical stores over the next three years. As a result of the store closures, CVS expects impairment charges in the range of $1B and $1.2B for FQ4’21. These are related to the write-down of operating lease, property, and equipment. In addition, by FQ1’22, CVS will also be creating three new community health hubs customized to the local population’s needs: Sites dedicated to offering primary care services;

An enhanced version of HealthHUB™ locations with products and services designed for everyday health and wellness needs; and

Traditional CVS Pharmacy stores that provide prescription services and health, wellness, personal care, and other convenient retail offerings. Bernstein analyst Lance Wilkes added:

“We see this as consistent with our expected LT (long-term) strategy for CVS, moving to grow managed care and care delivery while shrinking legacy bricks-and-mortar retail business.” ( Reuters ) CVS has also been increasing its online presence. In August 2021, CVS launched its first nationwide virtual health solution, Aetna Virtual Primary Care , powered by Teladoc ( TDOC ) and complemented by Aetna’s insurance provider. It provides its members with access to affordable and timely health services virtually and in-person via CVS’ MinuteClinic and HealthHUB locations. This complementary health service is part of CVS’s plan to expand its innovative products and services nationally while increasing its consumers’ base and engagement. CVS added: Aetna Virtual Primary Care gives our members the power of choice and convenience, making it easier for people to get and stay healthy, even when balancing the demands of work and life. This, coupled with access to in-person visits with providers in our network, including MinuteClinic and HealthHUB locations, provides the flexibility needed for better health outcomes. ( CVS ) CVS Is The Leading Player In Pharmacy Services

US Pharmacies by Prescription Drugs Market Share. Source: Drug Channels Institute

The US Census Bureau reported $300.86B in Pharmacy and drug store sales in 2020 . Of which, CVS accounted for 24.8% of the market share in prescription drug sales.

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source CVS Health: Not Expensive For What It’s Worth

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