TD Cowen updated its rating on CVS Health (NYSE: NYSE:CVS), elevating the stock from Hold to Buy. The firm also increased its price target for CVS shares from $59.00 to $85.00, indicating a substantial potential upside for investors.
The revision in the stock's outlook follows the release of CVS's 2025 Medicare Advantage (MA) plan benefits. According to the analyst, the company has made significant reductions in over-the-counter (OTC) benefits and dental allowances. Additionally, there appears to be an increase in the enrollment for plans with ratings of 4 stars or higher for the year 2025, rising to 90% compared to 73% in 2024.
The analyst's confidence in CVS Health has grown based on these developments, leading to the prediction of double-digit earnings per share (EPS) growth for the company in 2025. The estimated EPS is $7.54, which would represent a year-over-year increase of 15%.
The new price target of $85.00 reflects a 35% upside from the previous target, suggesting that the analyst sees significant growth potential for CVS Health stock in the near future. This upgrade is a notable change in the investment firm's perspective on the healthcare company's financial prospects.
CVS Health has seen several significant developments. Maintaining its Overweight rating, Morgan Stanley suggests a slight upside potential for CVS Health shares, despite uncertainties about the company's future structure. This follows speculation that CVS Health may consider separating its retail and insurance businesses. However, no official statement confirming such plans has been issued by the company. Meanwhile, Mizuho holds a positive stance, maintaining an Outperform rating on CVS Health shares and expressing skepticism about a potential split.
CVS Health recently announced the layoff of approximately 2,900 employees as a cost-saving measure. Additionally, the company revealed new Medicare Advantage plans featuring a $0 monthly premium on prescription drugs. CVS Health's potential strategic split of its retail and insurance operations is also under consideration, following private discussions with Glenview Capital Management about improving the company's operational performance.
InvestingPro Insights
To complement TD Cowen's optimistic outlook on CVS Health, recent data from InvestingPro provides additional context for investors. CVS's current P/E ratio of 11.15 suggests the stock may be undervalued, aligning with the analyst's bullish stance. This is further supported by an InvestingPro Tip indicating that CVS is trading at a low revenue valuation multiple.
The company's financial health appears robust, with a revenue of $361.86 billion over the last twelve months as of Q2 2024, representing a 7.03% growth. An InvestingPro Tip highlights that CVS has maintained dividend payments for 54 consecutive years, demonstrating a strong commitment to shareholder returns. Currently, the stock offers a dividend yield of 4.23%, which could be attractive to income-focused investors.
It's worth noting that CVS has shown a 12.22% price total return over the past three months, potentially indicating a positive momentum that aligns with TD Cowen's upgraded outlook. For investors seeking more comprehensive analysis, InvestingPro offers 8 additional tips for CVS Health, providing a deeper understanding of the company's financial position and market performance.
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