After years of outperformance, the stock of CVS Health suffered a 10-point straight decline last week, leading Jim Cramer to wonder if it is a broken company or merely a broken stock.
"CVS has gone from a market darling to a total dog, as its once-vaunted pharmacy benefit manager business has become an albatross around its neck and the company loses share to its rivals," the "Mad Money" host said.
Shares of CVS tripled from the summer of 2011 to the summer of 2015, but then fell into free-fall. They closed at $76 on Monday. The business includes both its 7,800 retail pharmacies, and its pharmacy benefit manager (PBM) segments.
Cramer boiled down CVS' issues for investors. For years, CVS was the PBM of choice for the California Public Employees Retirement System, but at the end of May it lost that business to OptumRx. Analysts at the time indicated there was increased competition in the PBM space.
When CVS reported in early August, it had mixed numbers, but management raised full year guidance. It also said that its PBM business had a strong selling season despite the departure of some high-profile clients.
However in August, Walgreens announced it would partner with Prime Therapeutics to better compete with companies like CVS. Just over a month ago, CVS was ousted from the pharmacy network that it runs for the Department of Defense, with Walgreens taking its place.
Thus, when CVS reported last Tuesday and slashed its guidance, leaving Cramer and many investors confused.
"I have to admit, it was pretty confusing given that management had just raised numbers three months ago — it made them seem clueless," Cramer said.
While the company had a top-line miss and a bottom-line beat, it was the guidance that concerned him. CVS said it expects to lose 40 million prescriptions next year. The culprit was competition, particularly from Walgreens, Cramer said.
While CVS outlined various initiatives to help offset the damage, Cramer said they don't fix the core issue of competition.
"Maybe they can turn things around, but for now, CVS remains in the penalty box until we see them take concrete steps to lessen their dependence on what was once the golden goose, now just a turkey headed for a carving," Cramer said.
CVS did not immediately respond to CNBC's request for comment.