CVS Settlement with FTC In Line with Expectations; Lifts Long-Standing Overhang

Research evidence excerpt

CVS Settlement with FTC In Line with Expectations; Lifts Long-Standing Overhang

TD Cowen CVS Health

Global Research July 14, 2026

VALUATION METHODOLOGY AND RISKS

Valuation Methodology

Drug Retailers:

We use a five-year discounted cash flow analysis as our primary valuation method to derive our

12-month price target. We generally assume a 10% discount rate but may apply appropriate

adjustments depending on company and/or industry specific factors. We also assume a

terminal growth rate that is dependent on our long-term view of the specific sub-industries

under coverage. We note our discount rate assumption could be viewed as conservative

relative to the actual weighted average cost of capital, but we view our 10% assumption as

reasonable over the long run. Lowering our discount rate assumption or increasing our terminal

growth rate assumption would lead to a higher estimated value per share. As a secondary

measure, we look at the forward P/E multiple and EV/Sales ratio implied by our DCF analysis

and compare that to historical averages.

We make investment recommendations on certain early stage, pre-revenue companies based

upon an assessment of their business model, technology, probability of market success,

and the potential market opportunity, balanced by an assessment of applicable risks. Such

companies may not be assigned a price target.

Investment Risks

We see a number of risks associated with the drug retail space: (1) the industry is highly

competitive with retail drugstore chains, independent pharmacies, mail-order providers, as

well as other retailers including grocery stores, mass merchants, warehouse clubs and online

stores all competing in the space which could further pressure front-end sales and margins,