After a 33 percent spike in share price of the past year, Cantor Fitzgerald downgraded CVS Caremark, saying Wednesday that shares of the drug store probably can't go much higher and pointed to some hints of slowing retail sales.
THE BACKGROUND: The Woonsocket, R.I., company reported a 16 percent jump in second-quarter earnings Tuesday, beating Wall Street expectations.
CVS Caremark runs the nation's second-largest drugstore chain, with more than 7,500 stores. Its Caremark unit also is one of the nation's largest pharmacy benefits managers, or PBMs. They run prescription drug plans for employers, insurers and other customers.
THE OPINION: Analyst Ajay Jain also lowered his CVS earnings estimates for 2013 and 2014 and dropped his price target on the stock to $62 from $65, in addition to the rating downgrade.
He said he's become slightly more cautious about trends for the company's retail segment, including drugstore revenue excluding pharmacies, and he thinks the stock is fully valued. Jain said there was some softness reflected in comparable-store sales during the last quarter.
"At this time, we don't believe there is sufficient basis to materially raise estimates (which is what's required to remain constructive on the stock at current levels)," Jain wrote.
THE STOCK: CVS Caremark shares fell 1.8 percent, or $1.09, to $58.80 Wednesday morning, while broader indexes slipped less than 1 percent. The shares also slid Tuesday after the company reported results, but the stock price had climbed about 27 percent so far this year before quarterly results were released.
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