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PreMarket Prep Stock Of The Day: CVS Health

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PreMarket Prep Stock Of The Day: CVS Health

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

CVS Health Corp (NYSE: CVS) has some positive news today, which has the issue in the green for now. While the news may good for its shareholders, the implications of what they did may not so good for the rest of us. With that in mind, CVS Health is the PreMarket Prep Stock Of The Day.

Underperformer Since August 2015: CVS Health made its all-time high in August 2015 at $113.58. At its current price of $60, it has had a negative return of 47%. Over that same period of time, the S&P 500 index has yielded a 65% increase.

It should be noted that during the March 2020 meltdown, as the index skidded 35% from it February high to its March low, CVS held up a little better, falling only 31% during that stretch.

As a result of its relative underperformance over the years, its March low ($52.04) coincided with its May 2019 low, while the index retreated to levels not seen since December 2016.

Laggard On The Rally: While the index was able to rally 65% off the March and make a new all-time high by a large margin, CVS rallied only 35% compared to its January high of $76.44.

Good News For CVS: Before Monday's open, the company announced plans to add 15,000 staffers on a priority basis. A major portion of new hires would include licensed pharmacists, as the company prepares for the flu season, along with ramping up COVID-19 testing.

While that's good news for the company and individuals looking for work, the implications of the need is concerning. By making this move at this time, it signals the company is expecting a dire need for testing services in the coming months. Adding new workers is a good thing, but adding them for this reason may not be such a positive move.

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PreMarket Prep's Take: Co-host Dennis Dick initial comment on the issue: “It is the best of breed, but that breed is not so good, sold to you.”

In other words, it may be the best of the drug stores, but overall the trend in the sector is down.

At that time, the issue was trading at the $60 area and the author of this article noted potential resistance points at the trio of highs from $60.22-$60.80 from Oct. 8-12. The upper part of the range was the exact same area of a pair of high from early September as well.

Off the open, the issue rallied into the middle of that area, reaching $60.44 and reversed course. As of 11:30 a.m. ET, CVS had fallen just past unchanged ($59.59) to $59.57 and was attempting to rebound.

The full discussion on the issue from today’s show can be found here:

 

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