Bank of America Securities analyst Allen Lutz has maintained their bullish stance on CVS stock, giving a Buy rating on May 8.
Allen Lutz’s rating is based on his analysis of CVS Health’s strategic initiatives and overall enterprise strength, despite current pressures in the Medicare Advantage (MA) segment. Lutz acknowledges the company’s clear plan to address higher than expected MA utilization, which has been a significant factor in the Health Care Benefits shortfall. The CFO of CVS Health outlined a combination of $400 million in higher utilization costs, with additional impacts from one-time items and forecast seasonality misses. Nevertheless, Lutz notes the company’s proactive steps, including pricing actions, benefit design changes, and leveraging improved Star ratings, to enhance margins and align with rates for FY25. Furthermore, the management’s commitment to driving margin improvements over membership growth and achieving target MA margins of 4%-5% in the coming years through ongoing initiatives reinforces the Buy rating.
Beyond the MA challenges, CVS Health is executing well in other areas of its portfolio, presenting multiple growth opportunities. These include the expansion of services like Cordavis and CostVantage, advancements in care delivery assets such as Oak Street and Signify, and robust prescription trends in Pharmacy and Consumer Wellness. Management’s conservative guidance in light of the 1Q timing miss and the potential for outperformance in consumer demand further bolster confidence in the company’s prospects. Lutz also highlights the potential for CVS Health to benefit from new pharmacy model negotiations with PBMs, which have not yet been factored into long-term guidance. The analyst perceives a favorable risk-reward profile for CVS stock, citing the market’s undervaluation of potential improvements in both MA and pharmacy margins. Consequently, maintaining a Buy rating with a price objective of $77, Lutz sees a strong growth trajectory for CVS Health in FY25 and beyond.
In another report released on May 8, Truist Financial also maintained a Buy rating on the stock with a $66.00 price target.
Based on the recent corporate insider activity of 50 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of CVS in relation to earlier this year.
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CVS Health (CVS) Company Description:
Headquartered in Rhode Island and founded in 1963, CVS Health Corp. is a healthcare company in the U.S. that owns CVS Pharmacy, a retail pharmacy chain; CVS Caremark, a pharmacy benefits manager; Aetna, a health insurance provider, among many other brands.
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