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Wolfe Research think this pharma stock can bounce back and deliver long-term earnings growth


Now is not the time for investors to ditch CVS Health , according to Wolf Research. The firm upgraded the stock to outperform from “peer perform,” noting it has an “attractive” risk-reward ratio. Analyst Justin Lake raised his price target to $80, implying 16.4% upside from Monday’s close of $68.75, which was the firm’s previous price target. The analyst said he sees potential for CVS to more conservatively set expectations for earnings growth in 2025 and beyond in the high single-digit range. “When combined with more realistic targets at December Investor Day for 2025 and beyond, this sets up potential for investors to have confidence in CVS delivering in-line to better EPS vs. expectations starting in the 2025 – for the first time in recent memory,” Lake said in a Monday note. “In turn, that should drive multiple appreciation from current levels.” Shares of the pharmaceutical chain have pulled back more than 26% from the start of the year, plunging in mid-August after Blue Shield of California had said it will drop the company’s pharmacy benefit management services. The stock has gained 5.5% so far this month, however, and rose 4.4% during Monday’s trading session. Shares were up 0.8% premarket Tuesday. The firm expects a low- to mid-single-digit decline in the company’s retail segment, as well as reinvestment of selling, general, and administrative expenses into growth projects. Combined, Lake said these efforts should effectively allow CVS to “reinvest for future growth.” To be sure, the analyst said that although CVS could earn substantially in 2025 from repricing its Medicare Advantage business, this may not “fully translate” to the company’s earnings per share in 2025. He noted that newly appointed CVS executive vice president and Aetna President Brian Kane “likely has investment targets in that business to stimulate growth.” CVS was one of the most oversold companies in the S & P 500 in the trading week ending Sept. 1, according to a CNBC Pro screening. — CNBC’s Michael Bloom contributed to this report.

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