Jim Cramer Says CVS Health Is Too Cheap to Ignore After 22% Selloff

Insider Monkey·10 Oct 2026·

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Analyst Earnings Regulation Health Care Providers & Services

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Jim Cramer used the October 6 episode of Mad Money to argue that CVS Health Corporation has become too cheap to ignore after its stock plunged from $110 to $86, even as the company's earnings outlook improved. CVS reported second-quarter revenue of $106.1 billion, up 7.3% year over year, with adjusted EPS rising to $2.58 from $1.81 and GAAP diluted EPS climbing to $2.31 from $0.80, while the insurance business's medical benefit ratio improved to 87.4% from 89.9%. The company raised its full-year adjusted EPS guidance to $7.90 to $8.10 and its operating cash flow outlook to at least $11.5 billion, and management placed a reasonable floor under 2027 adjusted EPS at $8.44. Cramer said a possible 5% hit to next year's earnings should not send a stock down 22%, knocking nearly $30 billion off the company's market cap, especially not when CVS remains very strong. The uncertainty centers on Caremark, where the Centers for Medicare & Medicaid Services' July proposal would pay average sales price minus 33.4% for drugs acquired through the 340B program, and where the FTC's July settlement would separate manufacturer fees from drug list prices and add transparency and options to move away from rebate guarantees and spread pricing. CVS also said Caremark membership would decline in 2027 as contracts change and some insurance clients withdraw from markets. Using the October 7 closing price of $87.95 and the $8 midpoint of CVS's 2026 adjusted EPS guidance, the stock trades at approximately 11x this year's projected adjusted earnings, versus approximately 9.1x for Cigna based on its $278.51 closing price and its 2026 adjusted earnings guidance floor of $30.45. According to Insider Monkey's data, 88 hedge funds held CVS Health in the second quarter, compared with 84 in the first quarter, with Pzena Investment Management the most prominent shareholder at around 11.77 million shares and GQG Partners increasing its holdings by 25137% to 7.955 million shares, while short interest stood at 1.27% of the public float.

CVS Health Corp ▲

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CVS Health Corp

CVS

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Cramer argues CVS is too cheap after a 22% selloff despite improved earnings outlook, raised EPS guidance, and strong cash flow, framing the stock as undervalued.