Walgreens Boots Alliance (ticker: WBA) saw its stock rise on Monday following positive remarks from analyst Lisa Gill of J.P. Morgan. Gill expressed confidence in the beaten-down retail pharmacy chain after recent management changes.
Buoyant Upgrade and Increased Target Price
Lisa Gill upgraded Walgreens stock from Neutral to Overweight and raised her target price for the stock to $30 from $27. This call comes in the wake of disappointing financial results and the announcement of a new CEO.
Prior Setbacks and Market Conditions
In September, Walgreens stock experienced a decline when Chief Executive Rosalind Brewer stepped down from her position. However, even before this news, the shares had been on a downward trend. Walgreens had already reduced its profit outlook in June due to lower demand for Covid-19 vaccines and testing, as well as cautious consumer spending.
Year-to-Date Performance
So far this year, Walgreens stock has seen a significant 43% decrease.
Mixed Financial Report and Timely CEO Appointment
On October 12, Walgreens reported weaker earnings and revenue figures compared to Wall Street’s expectations. Additionally, the company provided less optimistic financial guidance for fiscal 2023 than analysts had anticipated. Nevertheless, it was the announcement of Tim Wentworth’s appointment as the new CEO that sparked hope among investors.
A New Era for Walgreens
In a research note, Lisa Gill stated, “Today commences a new era for shares of WBA as Tim Wentworth assumes the CEO role.” Gill believes that with a refreshed healthcare-focused management team and realistic targets, Walgreens has the opportunity to overcome current challenges and improve its performance in the coming quarters.
Walgreens’ Management Team Brings Encouragement
An analyst has expressed optimism about Walgreens’ future as the company benefits from the wealth of experience brought in by its new CEO, Wentworth. With a background that includes stints at Express Scripts and Cigna Group (CI), Wentworth’s expertise is seen as a positive driver for the company.
The analyst also predicts that Walgreens will take measures to improve its financial standing. This may involve a reduction in the company’s quarterly dividend, currently at 48 cents per share, to prioritize debt reduction.
A Rating Based on Execution and Valuation
The analyst’s positive rating is based on the expectation of an enhanced management team delivering results that surpass previous performances. Additionally, the valuation of Walgreens is considered to incorporate any uncertainties related to the current situation. Currently, Walgreens trades at 6.2 times forward earnings, which is below the five-year average of 8.7 times.
However, it is important to note that not all analysts share this optimistic viewpoint. Ann Hynes, an analyst at Mizuho Securities, has lowered her price target for Walgreens and maintained a Neutral rating on the stock. Hynes has also revised her earnings estimates for fiscal years 2024 and 2025, reducing them by 30 cents and 20 cents per share respectively.
Hynes believes that future growth in the company’s valuation will depend on improved earnings and cash flow generation, as well as the achievement of profitability in the U.S. Healthcare segment.
Stock Performance
As of Monday’s premarket trading session, Walgreens’ shares saw an increase of 3.4%, trading at $21.99.
