CVS stock ticks up on upgrade from Wolfe
CVS Health (CVS) shares trend higher this morning after receiving an upgrade from Wolfe Research, promoting the pharmacy chain to an Outperform rating. Yahoo Finance Live takes a look at CVS’ relationship with consumers as it shared waning demand for COVID-19 tests.
Video transcript
SEANA SMITH: We're also watching shares of CVS today after Wolfe Research upgraded the stock to outperform from peer perform. Raises price target to $80 a share. The firm citing attractive risk-reward for the health care company in 2025 and beyond is one of the reasons behind the upgrade.
Now, this has been a tough year for CVS shares down about 26% from where they started the year. Moving a bit to the upside here today ahead of the open. Up just about 1%. But when you take a look at that three-month chart, the stock still in the red, off just about 4%. So the risk-reward value, that's really at the heart of this note here from Wolfe Research saying that they think it's an attractive setup, at least, for now.
They have a more realistic long-term guide here in setting up what the revenue expectations are going to be over the next two years. At least for Wolfe Research, enough here to issue the upgrade on CVS today.
BRAD SMITH: Yeah. This is also a big day for CVS. They're going to be speaking at the Morgan Stanley Global Health Care Conference. So we'll see what more we hear from executives on that particular appearance. But for what Wolfe is looking for here, they're actually looking for low to mid single digit retail segment declines.
So that notable here coming off of an earnings period, where, ultimately, the company was talking a lot across that retail landscape. What they are seeing continued and where they can continue to have that engagement with many of the consumers that previously over the past two years, especially 2021, once vaccines became available, there was a lot more foot traffic.
And so now, where are they banking on that foot traffic coming in from? It is on the prescriptions. It's on continuing to have that retail customer also see something else in the aisle. And say, yeah, I need some Bengay. Or I need some Icy Hot patches or something. My back hurts--
SEANA SMITH: I was going to say--
BRAD SMITH: --all the time.
SEANA SMITH: --I worry so much about Brad here in the first 30 minutes of the show. When it comes to CVS business, we know that they have been pushing further and further here into the services side of things. They had that $8 billion acquisition of Signify Health. They had the $10.6 billion acquisition of Oak Street Health. And within the last earnings report that was just over a month ago, they outlined some cost cutting measures here in order to balance some of their numbers here, at least, over the next couple of quarters.
So whether or not that pays off, we're going to have to see. But their most recent quarter, they had revenue of $88.9 billion. That beat with the Street was looking for also adjusted EPS coming in better than expected. We'll see whether or not that bet here on services or a deeper push here into services is going to pay off for CVS.
CVS, certainly, hoping that is the case. Wolfe Research, at least for now, saying that when you take a look at CVS' business, when you take a look at the fact that the stock has been under a significant amount of pressure since the start of the year, as well as many of its peers for reasons that Brad just went through here, the fact that people are not getting COVID tests like they were. They are not going to some of these pharmaceutical giants in order to get their COVID test or COVID shots here, obviously, weighing on their business.
So we'll see whether or not the services push is enough to turn things around.