Why CVS Caremark Is Ready to Rebound

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of CVS Caremark (NYSE: CVS  ) climbed 1% in early trading today after Jefferies Group initiated coverage on the drug retailer with a buy.

So what: Along with the bullish call, analyst Mark Wiltamuth planted a price target of $71 on the stock, representing about 25% worth of upside to yesterday's close. Shares have slumped in recent months on signs of slowing revenue growth, but Wiltamuth thinks the pullback provides investors with a solid bargain opportunity given the numerous tailwinds working in CVS' favor.

Now what: Jefferies believes CVS is in a particularly good spot to capitalize on long-term trends.

"We recommend CVS Caremark as a core holding as we view it as the drug retailer best positioned to benefit from the Affordable Care Act, the aging of baby boomers and double-digit growth in specialty pharmacy," Jefferies noted. "As the #1 US drugstore, #2 PBM, #2 in Medicare Part D insurance plans, and #2 in Specialty Pharmacy, the company's integrated PBM/retail model is best positioned to capture the coming shifts in the marketplace, in our view."

More importantly, with the stock off about 10% from its 52-week highs and trading at a reasonable forward P/E of 12, investors have some room to benefit from that prime position. 

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