CVS Shares Break Above $69 Level Following ISI's Upgrade to Strong Buy

ISI Group's Ross Muken upgraded CVS Corporation

from Buy to Strong Buy early Wednesday morning. The analyst maintains a $78.50 price target. Muken believes a recent pullback in CVS shares (the stock is down almost 4 percent since the beginning of 2014) has created "an attractive buying opportunity for a world class large-cap franchise..." The analyst called CVS a "must own large cap name in healthcare." Muken pointed to CVS' enterprise-based strategy delivering "impressive core growth over a multi-year period" and said this trend should continue over the medium term. The ISI analyst also said he likes the company's "highly shareholder-friendly capital deployment program (>$5 Bn returned to shareholders via share repo and dividends in 2013) and a pristine balance sheet (2.7x adj. debt/EBITDA that provides for upside optionality)." "We see the greatest opportunities for upside via MinuteClinic (37% revenue CAGR since 2007), Managed Medicaid expansion (CVS has largest market share with ~28% of covered lives), specialty (new Specialty Connect offering), improved generic sourcing (recent JV with CAH that could be ~4% accretive post implementation), and the ACA exchanges (unique positioning on carve in / out basis for over 80+ health plan clients)," according to Muken. The ISI analyst highlighted the following upcoming catalysts:

Shares of CVS are trading up more than 1 percent to $69.12 heading into the last hour of trade.