CVS Stock Upsurge- Strategic or Risky?

PUBLISHED May 9, 2025, 7:48:36 PM        SHARE

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ImageHult Intern

About CVS Health Corp (CVS)

Founded in 1963, CVS Health Corp provides high-quality, affordable and accessible health care through innovative means. It has its operations primarily in the United States, in all the 50 states, the District of Columbia and Puerto Rico. Offering the services of health care and wellness, prescription drug coverage, health insurance and pharmacy, it is consistently on the investor watchlist. As of May 2025, CVS Health has a market cap of $83.78 Billion, making it the world's 230th most valuable company by market cap.

CVS has witnessed a strong performance in the past few quarters, which has catapulted into analyst upgrades and surging stock performance. Although, it received a rating of BBB with a Negative outlook from Fitch at the start of this year due to identified operational challenges and market uncertainties.

In Recent Times

The stock showcased notable fluctuations along with its quarterly revenue and EPS, with FY 2024, third quarter being the lowest at a revenue of $95.4 Billion, adjusted EPS of $1.09 and net income of $87 Million (a plummet of 96% from the prior-year period). This steep plunge can be attributed to the anticipated effects of the $1.1 Billion premium deficiency reserve in the Health Care Benefits segment on the Medicare products lines. Also, the lingering bearing of the pandemic is experienced the most by the healthcare sector. The shifting utilization patterns, supply chain residue and labor shortages continue to ail the steadily recovering sector.

CVS had a couple of rough quarters in the past which can be retraced to FY 2022, first quarter when it recorded a revenue of $76.8 Billion, a sharp decline of 23% from its winning performance in FY 2025, first quarter. These fluctuations can be attributed to the negative impact of the company’s regulatory fines and premium deficiency reserves, equilibrated by its strategic initiatives and the developments in the health care sector.

Resurgence in 2025

CVS made a key turnaround in 2025, recuperating from its setbacks in the last few years. Its revenue of $94.59 Billion, marking a year-on-year increment of 7%, surpassed the analyst expectations by 1.5%. It reported an adjusted EPS of $2.25 and its operating cash flow projected at $7 Billion for 2025, up from $6.5 Billion. Reuters raised its full-year adjusted EPS guidance to $6.00–$6.20 from the prior estimate of $5.75–$6.00.

The reasons for its strong investment returns are the improved performance of Medicare Advantage, strategic leadership developments, exit from Affordable Care Act and its partnership with Novo Nordisk for the preference of the latter’s weight-loss drug Wegovy. Its shares rose nearly 60% since the beginning of 2025, reaching their highest value since April 2024. This is the result of the bolstered investor confidence owing to the company’s strategic actions.

Expected Developments

Out of 20 analysts, 16 rate it as a Strong Buy stock. The market has positively responded to the company’s operational proficiency in FY 2025, first quarter which demonstrates a highly sustainable plan by the company for its strategic advancements. Also, the company’s success at consistently outdoing the analyst recommendations has further boosted the market assurance.

The partnership with Novo Nordisk will be closely watched by the investors as it is expected to increase revenue and the company’s global footprint. The apprehension about the stock’s movement is because of Fitch’s BBB rating with a Negative outlook, rising industry costs which affect its margins, sector uncertainties and enhanced regulatory scrutiny of the industry.

Buy, Hold or Sell?

CVS has a Moderate Buy status. The prevalent resilience of the CVS stock is geared for further growth with the promising plans of the company. However, this is not without constraints. The investors stay cautious of the regulatory changes in the sector and CVS’s ongoing risks in its insurance and retail divisions. Its Aetna unit plans to withdraw next year from the Affordable Care Act coupled with the CVS Novo Nordisk deal, is expected to lead to short-time revenue decline and increased regulatory risks.

Under the leadership of the new CVS CEO, David Joyner, the company has announced a $2 Billion cost-saving plan and the closure of 270 underperforming stores to gain cost efficiency. Its strategic exits, partnerships and acquisitions are viewed positively by the market. Moreover, the stock is undervalued with a forward PE ratio of 11.03 which is below the sector average and thus worth seeking.

Current Stock Price- $67.28



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