Wall Street Loves CVS Health Stock Right Now. Should You?

CVS Health (NYSE: CVS) dealt with significant headwinds after the COVID-19 pandemic. The company's financial results suffered as sales of coronavirus-related products (such as diagnostic tests) declined, while expenses in its insurance business rose substantially, resulting in lower profits and margins. However, CVS Health has done a good job of addressing those problems, and the stock has rebounded. Shares are up 31% over the past 12 months. Wall Street thinks there may be even more upside on the horizon. CVS Health's average price target is $116.04 (according to Yahoo! Finance), implying a meaningful 20% upside from current levels. Is now a great time to buy the stock?

Image source: The Motley Fool.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Recent financial results paint a bright picture

Over the past 18 months (or so), CVS Health has implemented several initiatives that have helped improve its business. For instance, the company closed dozens of stores, many of which were unprofitable. The pharmacy chain specialist also scaled back its insurance division, notably by exiting the Affordable Care Act marketplace. The results have been pretty impressive. Consider the company's second-quarter results. CVS Health's revenue increased by a healthy 7.3% year over year to $106.1 billion.

Adjusted earnings per share were $2.58, 42.5% higher than the year-ago period. Note the improvement in CVS Health's healthcare benefits segment, which offers health insurance services. Operating expenses as a percentage of revenue declined slightly to 12.4%, down from 12.5% in the prior-year quarter, even as revenue grew 3.5% year over year. And operating margins within this unit came in at 5.8%, up from the 2.8% reported in the year-ago period. Also, CVS Health's medical benefits ratio -- the percentage of insurance premiums the company spent on medical care (the lower the better) -- declined to 87.4% in the second quarter, down from 89.9% in Q2 2025.

CVS Health also increased its guidance for the full fiscal year 2026. The company now expects its adjusted EPS to fall between $7.90 and $8.10, up from its previous range of between $7.30 to $7.50. The company is also now projecting cash flow from operations of at least $11.5 billion, up from the previous lower bound of $9.5 billion. These are signs of a much-improved business.

CVS Health pounces on a new opportunity

CVS's disciplined cost control and large, diversified healthcare offerings could power solid revenue and earnings growth over the medium term. It's also worth noting that the company is positioning itself to capitalize on a key growth driver: the rapidly expanding weight-loss market. Insurance coverage for GLP-1 weight loss medicines such as Zepbound, Wegovy, and Foundayo has been lacking. As a result, some patients who want these therapies haven't been able to access them.

CVS Health is making it easier for them to do so. The company offers low-cost consultations with licensed healthcare professionals for GLP-1 prescriptions, along with access to all medicines in this niche that are approved by the U.S. Food and Drug Administration. Further, CVS Health offers coaching (still with professionals) as patients go through their weight-loss journeys, along with over-the-counter products to manage side effects.

These initiatives could meaningfully impact the company's revenue, and it's important to highlight just how massive this opportunity could be. According to some analysts, the weight loss market will reach $150 billion by 2035 -- it was worth just $15 billion in 2024. Over the next few years, more medicines will enter the field, and perhaps insurance coverage will evolve as more data come in on the benefits of these drugs. CVS Health is well-positioned to capitalize on this opportunity through its pharmacy and insurance divisions.

CVS Health's vertically integrated healthcare model, popular brand name, and large ecosystem of patients who rely on it for their prescriptions are important assets that have allowed it to keep costs under control in recent years while positioning it well to profit from the weight-loss market's growth. And these are all qualities that make the stock an attractive long-term bet, even before we mention its attractive dividend program: CVS Health offers a forward yield of 2.8%, versus the S&P 500's average of 1.1%. In short, Wall Street's optimism is well-founded: CVS Health is an attractive stock to buy.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.