CVS Health is considering splitting its retail pharmacy and insurance units
Shares of CVS Health Corp (NYSE:CVS) are 3.9% higher to trade at $65.40 at last glance, after several updates for the healthcare giant. According to reports, CVS' insurance unit is facing higher-than-usual medical costs and other major issues. In response, the company is conducting a strategic review, and considering shifting from its long-held business strategy by splitting its retail pharmacy and insurance units.
Amid this big news, TD Cowen upgraded CVS Health stock to "buy" from "hold" and hiked its target price to $85 from $59, citing changes to the company's 2025 Medicare Advantage plan benefits as a catalyst. Coming into today, analyst sentiment was split, with 11 rating CVS a "hold" and 13 recommending a "buy" or better, leaving room for more bull notes to roll in.
Puts are more popular at the moment, and a change in the options pits could provide more support. This is per the security's 10-day put/call volume ratio of 0.78 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that stands higher than 83% of readings from the past 12 months. Echoing this, its Schaeffer's put/call open interest ratio (SOIR) of 0.59 stands in the elevated 73rd percentile of annual readings.
This shift looks to be taking place, with calls outpacing puts during today's trading. Already, more than 52,000 calls have crossed the tape, 6 times the average intraday volume and well above the 3,484 puts traded so far. Most popular by far is the weekly 10/11 69-strike call.
On the charts, today's bounce puts CVS Health stock on track to close above its 160-day moving average that's acted as resistance since early April. Shares are filling a post-earnings bear gap from April that sent them to their lowest levels since April 2020, resulting in a more than four-year low of $52.78. Pacing for its second consecutive weekly gain of more than 6%, CVS is still down more than 17% in 2024.