Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
CVS Health Corporation (NYSE: CVS) faces potential activist pressure as healthcare-focused hedge fund Glenview Capital Management prepares to meet with top executives on Monday, according to WSJ reporting. The meeting comes amid investor unrest, with CVS shares down 24% year-to-date. Glenview Capital, founded by Larry Robbins and managing approximately $2.5 billion in assets, owns about 1% of CVS’s shares outstanding, valued at around $700 million.
Glenview’s Push for Change at CVS
Glenview’s founder, Larry Robbins, is reportedly set to meet with CVS CEO Karen Lynch and other executives to propose ways to energize the company without dissolving it. The hedge fund’s move reflects growing concern among investors about CVS’s performance. At least one other hedge fund has recently established a significant position in the company, potentially signaling broader activist interest.
CVS Health, one of the largest healthcare companies in the U.S., has faced financial challenges in recent months. The company has repeatedly cut its earnings guidance for 2024 and announced $2 billion in additional cost cuts and management changes in August. CVS’s Medicare business has been particularly troublesome, contributing to its financial woes.
Despite recent challenges, CVS stock showed signs of recovery in pre-market trading on September 30, 2024. The stock price rose to $63.15, up $1.77 (2.88%) at the time of writing (7:37 AM EDT) from the previous close of $61.38. This follows a 4.02% gain in the previous trading session.
However, the stock’s longer-term performance has lagged behind the broader market. CVS has significantly underperformed the S&P 500 across various timeframes, with a year-to-date return of -19.91% compared to the S&P 500’s 20.30% gain.
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What CVS Shareholders Should Look Out For
Investors should be aware of several factors as this situation unfolds. The potential for activist pressure from Glenview Capital and possibly other hedge funds could lead to significant changes in CVS’s operations. The company’s recent financial struggles, particularly in its Medicare business, and its efforts to adjust its Medicare approach for 2025 are critical areas to watch.
Additionally, ongoing scrutiny of CVS Caremark, the pharmacy-benefit unit, by the Federal Trade Commission adds another layer of complexity. Broader issues across the insurance industry with Medicare Advantage, recent management changes, and CVS’s plans for cost-cutting and operational improvements are also important considerations for investors.
With analyst recommendations leaning towards “Buy” and a high price target of $91.12, the market appears cautiously optimistic about CVS’s potential for recovery.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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