Market Overview

Needham Sees A Healthy Risk-Reward For CVS Health

Share:
Needham Sees A Healthy Risk-Reward For CVS Health
Related CVS
Pot Stocks, ETFs, Top News And Data From The Cannabis Industry This Week
CVS Is One Step Closer To Buying Aetna
M&A Updates And New Deals: 2 Cannabis Industry Mergers (Seeking Alpha)

CVS Health Corp (NYSE: CVS)'s proposed acquisition of health insurer Aetna Inc (NYSE: AET) could be seen as a move to better defend itself should Amazon.com, Inc. (NASDAQ: AMZN) flex its muscles and enter the drug space.

The Analyst

Needham's Kevin Caliendo.

The Rating

Caliendo upgraded CVS' stock from Hold to Buy with a newly established $79 price target.

The Thesis

The acquisition of Aetna could generate a "great outcome" even though any deal would likely be dilutive to its earnings in 2019, Caliendo said in a note. Without Aetna under its umbrella, CVS would face heightened competition and margin pressures within both of its businesses. But with Aetna under its control, CVS can leverage its businesses and create a "powerful vertically integrated health care conglomerate" that would save money and generate superior outcomes for consumers.

In fact, Aetna would give CVS the chance to "change the way healthcare is delivered in the US" as it would become an "all-purpose health mart" where consumers can see a doctor, get a test done, pick up an Rx and any wellness item, the analyst wrote.

Under a worst-case scenario in which Amazon's entrance into the market is disruptive and CVS doesn't merge with Aetna, CVS has a downside potential to $59. If Amazon were to come to the market through an acquisition of a small pharmacy benefit manager and CVS doesn't merge with Aetna, then the downside to CVS stock would be to $69.

Price Action

Shares of CVS were trading higher by more than 2 percent Friday morning.

Related Links:

The Health Care Episode: Reviewing Earnings Season And A CVS/Aetna Merger

Amazon Pharmacy Rumors Heating Up Again: Here's What We Know

Image Credit: Ildar Sagdejev (Specious) - Own work, GFDL, via Wikimedia Commons

Latest Ratings for CVS

DateFirmActionFromTo
Sep 2018Bank of AmericaMaintainsBuyBuy
Jul 2018CitigroupAssumesNeutralBuy
Jul 2018Morgan StanleyMaintainsOverweightOverweight

View More Analyst Ratings for CVS
View the Latest Analyst Ratings

Posted-In: Health stocks healthcare Kevin Caliendo NeedhamAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (AMZN + AET)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
TEAMKeyBancUpgrades89.0
VIABImperial CapitalUpgrades29.0
AMDBarclaysUpgrades25.0
CDNSJP MorganUpgrades51.0
EBAYRBC CapitalDowngrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Tap Nvidia's Growth Story With These Tech ETFs

Focus On These 5 Momentum Stocks Using The Driehaus Strategy