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Why Is CVS-Signify Deal a Win-Win for Both?

Story Highlights

From finding the right fit to enhancing technological capabilities, a deal between CVS and Signify provides the companies exactly what they had been looking for.

Rhode Island-based CVS Health Corporation (NYSE: CVS) intends to add Signify Health, Inc. (NYSE: SGFY), a healthcare technology company, to its portfolio, according to a Wall Street Journal report. A deal, if reached, between the two healthcare companies would be a win-win situation for both.

While a successful deal with Signify would enhance CVS Health’s technological and analytical capabilities, Signify will be able to find itself a strategic fit. SGFY stock closed at $19.87 on Friday.

Earlier this month, a Wall Street Journal report highlighted Signify Health’s desire to find strategic alternatives for the company. Any deal with CVS Health would be a step forward in this direction.

This deal would also expand CVS Health’s presence in the medical services market, especially in the in-home care segment.

The company’s President and CEO, Karen S. Lynch, said, “The continued success of our foundational businesses accelerated our strategy to expand access to health services and help consumers navigate to the best site of care.”

What Does CVS Health offer?

CVS Health operates a retail pharmacy chain, acts as a pharmacy benefits manager, and provides health insurance services. Exiting the second quarter of 2022, the company had at least 40,000 nurses, physicians, and other medical practitioners working for it. The last closing price of this $134.1-billion company was $102.26.

Is CVS Health a Buy or Sell?

As of now, analysts have mixed feelings about the stock. As per TipRanks, the Street is cautiously optimistic about the prospects of CVS Health, which commands a Moderate Buy consensus rating based on seven Buys and four Holds. CVS’ average price target of $119.09 reflects 16.46% upside from the current level.

Four days ago, Kevin Caliendo of UBS reiterated a Buy rating on CVS Health while increasing the price target to $127 (24.19% upside potential) from $118.

In August, the company increased its projection for adjusted earnings to $8.40-$8.60 per share for 2022 from the $8.20-$8.40 per share range anticipated earlier.

CVS stock seems to be a good pick for prospective investors if we consider the company’s projections for 2022 and analysts’ views.

Is SGFY Stock a Buy?

Analysts on TipRanks are unanimously optimistic about the company’s prospects and have a Strong Buy consensus rating based on seven Buys and one Hold. SGFY’s average price forecast is $24.63, mirroring 23.96% upside potential from current levels.

Also, the company forecasts revenues from the Home & Community Services segment to be within the $800-$810 million range. This segment accounted for 84% of the company’s revenues in the second quarter of 2022.

Four days ago, Jessica Tassan of Piper Sandler maintained a Buy rating on SGFY while increasing the price target to $34 (71.11% upside potential) from $32.

In brief, Signify Health stock, too, seems to be an attractive investment option for prospective investors.

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