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CVS Health (NYSE:CVS) extended gains on Tuesday with a ~2% rise after Wolfe Research upgraded the beaten-down healthcare giant, citing a potential inflection point within the next 6–12 months.
Wolfe’s bullish views come at a time when CVS (CVS) shares have lost more than 33% over the past 12 months, underperforming the broader market.
It also follows the firm’s note on Monday that indicated the company’s confidence in achieving 4-Star ratings in its key Preferred Provider Organization (PPO).
When combined with the potential to achieve 4-Star ratings with a PPO plan with nearly 2M members, “the risk/reward profile in the intermediate term turns positive in our view,” analyst Austin Gerlach wrote.
He upgraded CVS to Outperform from Peer-Perform with an $80 per share target.
However, Gerlach expects the company to set more realistic long-term expectations for earnings growth for 2025 and beyond at its December Investor Day.
This will involve “a much more realistic low+-to-mid-single-digit decline in the company’s Retail segment,” and a focus on reinvestment of SG&A into growth versus the bottom line, the analyst added.
However, according to Gerlach, these conservative expectations will allow CVS to hit intermediate goals and reinvest for future growth, positioning the company to deliver better than expected or in-line earnings per share “starting in 2025—for the first time in recent memory.”
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