What’s Next For CVS Health Stock After A Downgrade For Its Medicare Plan?

CVS: CVS Health logo
CVS Health

CVS Health stock (NYSE: CVS) has seen a 14% fall in a month, while it was down 10% last week. This compares with an 11% fall for the broader S&P500 index in a month and a 1% decline last week. The fall for CVS, particularly, can be attributed to a downgrade in its largest health insurance plan for Medicare patients, with 1.9 million members. The reduced rating implies the plan’s ineligibility for performance-based bonus payments from the government in 2024. The investors were concerned about its impact on earnings, resulting in a sharp fall in CVS stock. However, in an SEC filing, the company stated that it will still be able to see a low double-digit rise in earnings in 2024. CVS acquired Aetna in 2018, giving it access to the health insurance market, and it accounts for a quarter of the company’s revenue. Our dashboard on CVS Revenues has more details.

Now that CVS stock has seen a fall of 14% in a month, will it continue its downward trajectory, or is a rise imminent? Going by historical performance, there is a higher chance of an increase in CVS stock over the next month. A move of -14% or more in a month for CVS has occurred 58 times in the past ten years. Of those instances, 35 resulted in CVS stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 35 of 58 or a 60% chance of a rise in CVS stock over the next month. See our analysis of CVS Health Stock Chance of Rise for more details.

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Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using the last ten years’ data

  • After moving -9.7% or more over five days, the stock rose on 65% of the occasions in the next five days.
  • After moving -9.7% or more over ten days, the stock rose on 55% of the occasions in the next ten days.
  • After moving -13.6% or more over a twenty-one-day period, the stock rose on 60% of the occasions in the next twenty-one days.

This pattern suggests a higher chance of a rise in CVS stock over the next five days, ten days, and the next month.

CVS Health (CVS) Return (Recent) Comparison With Peers

  • Five-Day Return: TGT highest at 0.4%; CVS lowest at -9.7%
  • Ten-Day Return: TGT highest at 2.4%; CVS lowest at -9.7%
  • Twenty-One Day Return: WMT highest at -6.1%; KR lowest at -17.2%

While CVS stock looks like it can see higher levels, it is helpful to see how CVS Health’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Given higher inflation and rising interest rates, among other factors, CVS stock has seen a 14% fall this year. Can it drop more? See how low CVS Health stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Biogen vs. AGCO.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Oct 2022
MTD [1]
YTD [1]
Total [2]
 CVS Return -7% -14% 12%
 S&P 500 Return 2% -24% 63%
 Trefis Multi-Strategy Portfolio 3% -24% 200%

[1] Month-to-date and year-to-date as of 10/10/2022
[2] Cumulative total returns since the end of 2016

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