CVS Health Blasts Higher, But We’re Not Buying Yet

A logo of CVS Health is displayed on a monitor above the floor of the New York Stock Exchange shortly after the opening bell in New York

There could be more upside for CVS Health Corp. (CVS).

While the stock just broke to new highs, we wouldn’t buy just yet.  At $97.20, the stock is now technically overbought on RSI and Williams’ %R.  The last few times these indicators became this overbought, the CVS stock dropped shortly after.

In fact, if you pull up a three-year chart of CVS, you can see it happened in November 2019, June 2020, November 2020, January 2021, May 2021, and November 2021.  The stock appears ready to drop from similar overbought conditions again now.

Once it does pull back, we’d use weakness as opportunity.

Not only did the company just boost its fiscal year guidance, it raised its dividend 10%.  The company now sees adjusted EPS of $8 a share, as compared to earlier expectations for $7.90 to $8 a share.  Revenue guidance was raised to $290.3 million from a prior range of $286.5 million to $290.4 million, as well.  Analysts estimated EPS of $7.96 on revenue of $288.4 million.

CVS also boosted its annual dividend to $2.20 from $2, and authorized a $10 billion buyback.

While there’s plenty of good news, we’d wait to buy on the next pullback.