Shares of CVS Health (CVS 3.49%) rallied out of the gate on Wednesday morning, adding as much as 4.7%. As of 12:14 p.m. ET, the stock was still up 3.3%.
The catalyst that sent the healthcare giant higher was bullish takes from a trio of Wall Street analysts.
Bullish consensus is growing
In the wake of the company’s investor day on Tuesday, analysts are more bullish on the future prospects and the growing opportunity for CVS.
First up was J.P. Morgan analyst Lisa Gill, who is now more optimistic. While the company provided conservative guidance with respect to its long-term outlook, Gill saw “ample upside opportunities.” The analyst highlighted the introduction of CVS CostVantage — which will overhaul the way the company prices prescriptions to furnish greater transparency. Gill believes this will offset “long-term pharmacy reimbursement headwinds.”
Analysts from Piper Sandler were even more enthusiastic, maintaining an overweight rating while increasing their price target to $85, or potential upside for investors of 20% compared to Tuesday’s closing price. The analysts noted management’s more positive outlook, with its profit prospects at “achievable levels.”
Finally, Evercore ISI analyst Elizabeth Anderson maintained her overweight rating and raised her price target on CVS Health to $85 from $80. Anderson also noted the company’s conservative forecast, which suggests 6% earnings-per-share growth, with the potential for “upside from a variety of areas.”
Is CVS stock a buy?
The market rally has been brutally uneven this year, and investors need look no encourage than CVS for an example. The stock has fallen 21% thus far in 2023 as investors digested the loss of a big customer and what that means for the company’s future.
It remains to be seen if the rest of the industry will follow CVS’ example, but given the increased scrutiny of drug prices and oversight in the industry, it’s a step in the right direction.
Finally, CVS stock is remarkably cheap, currently selling for just 8 times forward earnings, a significant discount to the price-to-earnings ratio of the healthcare services industry of 15. Add to that its recently increased dividend, currently yielding 3.75%, and it’s easy to see why CVS stock is a buy for investors looking for a solid combination of stable growth and income.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Danny Vena has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.
