Tanquilut lifted his price target to $90 from $66.
The analyst said CVS' role in Covid-19 vaccinations will yield "earnings upside."
“Vaccination activity should also drive store traffic and aid SSS [same store sales performance] for CVS's retail pharmacies,” Tanquilut wrote in a commentary.
Meanwhile, “on the strategic front, progress with the rollout of HealthHUBs has reduced execution risk, making us more comfortable with the story,” Tanquilut said. CVS’ HealthHubs offer in-store and telehealth medical care.
“Strong free cash flow should fund debt paydowns, bring down leverage, and help restart share buybacks,” he said. “CVS' role in Covid vaccination should drive earnings-per-share upside over the next 12 months.” Tanquilut estimated “gross profit opportunity” of about $1 billion.
As for vaccinations, “the government's retail pharmacy-centric mass vaccination strategy should provide a solid tailwind for the pharmacy space, and CVS, with its approximately 25% market share, is best-positioned to benefit from this opportunity,” he said.
“Given the difficulty in sizing and timing this opportunity, we believe CVS shares still don’t reflect this tailwind, and we exclude any contributions from our estimates. We would also note that unlike lab tests, vaccinations [provide] more recurring revenue and earnings streams, given likely annual immunization needs.”
CVS shares recently traded at $75.86, up 2.52%, and have climbed 18% over the past 12 months.