As a result of Blue Shield of California's decision to turn away from the pharmacy benefit management (PBM) industry and utilize other services for managing its drug benefits, analysts have lowered their price targets on CVS Health. This decision poses a setback for CVS, along with potential threats to Cigna and UnitedHealth Group, which also own pharmacy-benefit managers.
CVS shares experienced a decline of 0.8% in premarket trading to $66.30, following an 8% loss in Thursday's trading session.
However, despite these developments, many analysts still view CVS as a promising investment.
According to Mizuho analysts Anne Hynes and Dillon Nissan, "We would be buyers of CVS and CI on today's weakness." They express skepticism regarding Blue Shield's plan to source more drugs from Amazon.com and others, questioning the widespread traction this model will gain.
Raymond James analysts led by John W. Ransom share a similar sentiment. They believe that while the market may have had an initial knee-jerk reaction, it is unlikely that many other large organizations will follow suit in the short term. Instead, they prefer to wait and assess the effectiveness of this arrangement in delivering the proposed savings and avoiding execution complications.
Although RBC Capital Markets has lowered their price target on CVS to $91 from $102, they still maintain a Buy rating on the stock.
On the other hand, Deutsche Bank analysts Pragya Gupta, George Hill, and Maxi Ma offer a different perspective. They expect more companies to move away from PBMs, albeit in varying ways. With a Hold rating on CVS, they anticipate changes in the industry.
In conclusion, while Blue Shield of California's decision has prompted analysts to adjust their price targets on CVS Health, opinions on the company's future outlook remain varied among industry experts.
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