CVS
On a positive note, looks like it wasn't a big contract, so not a big deal when it comes to the eps outlook. CVS just has less appeal to me right now, because yes it is a little cheaper. But don't love the actual pharmacy business and if I want to own a managed care/PBM, I can get better growth elsewhere, and if I want to own like a hospital play I can think of several better options that way. Yes it is cheap, but Maybe it only deserves a 7-8 PE with all the risks. Doubt it deserves more than 10 at that is point, given the cloudy growth outlook. This is why I sold at $76, best case scenario I could make it for it was FV of 85. But If I give this stock a 7 PE (Given the risks), that is about $60. Probably FV is around $75 or so, but even now that is hardly something to get excited about there are just much better options in the space.
I mean after 2024 which is a transition year CNC is thinking they will grow 12-15% annually. The stock is trading at about 9x Next year, and I much rather pay 9x for a company with long-term growth prospects of say 12-15%, than a company who has no growth at 8x. And this is even after the brutal selloff in CVS. So I'll still pass, probably low to mid 60's should hold but doubt there is much upside from there until we get much more clarity of the earnings picture, which is now in doubt, when they lowered 2024, and pulled 2025 guidance completely. And now this risk of losing contracts has come front and center, if I remember correctly didn't they lose another contract not that long ago, a much bigger one I believe, so losing contract seems to be happening a little more than I would like to see with this one. All is just my opinion, and I could always be wrong though.
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