Walgreens Boots Stock Just Hit Its Lowest Level Since 1998. Time to Buy the Dip or Stay Away? | The Motley Fool (2024)

It's been an ugly past year for Walgreens Boots Alliance (WBA -1.72%) stock, which is down over 45% in that span. It's been a tough decade, in fact, with the stock plunging over 75% over the past 10 years.

With the stock now trading where it was in 1998, let's look what has gone wrong for the company and whether investors should consider picking up shares in the stock at these levels.

Company struggles

One of the biggest issues facing Walgreens, and the pharmacy industry in general, has been constant reimbursem*nt pressure. The company has consistently talked about this issue since at least the start of 2016.

Within the prescription drug industry, pharmacies get reimbursed by pharmacy benefit management companies (PBMs) whose job it is to negotiate prices for their health insurance provider customers. The three big PBMs now control about 80% of the market and have been pushing down reimbursem*nt rates.

The pressure has hit the entire industry, from big pharmacies, such as Walgreens, to smaller independents. In a National Community Pharmacists Association survey, nearly a third of independent pharmacies said they were considering closing their doors this year due to reimbursem*nt pressures. Meanwhile, Rite Aid filed for bankruptcy last fall.

For its part, Walgreens has tried to expand beyond the pharmacy business to counteract the reimbursem*nt pressure it has been seeing. However, this led to a poor acquisition on its part, as former CEO Rosalind Brewer set out to create a more integrated company that would treat patients throughout their care continuum.

Walgreens' big mistake was buying a large stake in VillageMD, which itself was acquiring various medical groups to expand. However, expanding beyond its core markets proved difficult for ViilageMD, and last year the company decided to exit a number of newer markets. During its most recent quarter, Walgreens took a $5.8 billion after-tax goodwill write-down of its VillageMD investment in an admission that it greatly overpaid for the business.

For a company with $8.8 billion in net debt, not including operating leases, an ill-advised investment was not a good use of cash. The company is now looking to preserve cash and had to cut its dividend nearly in half back in January.

Walgreens Boots Stock Just Hit Its Lowest Level Since 1998. Time to Buy the Dip or Stay Away? | The Motley Fool (1)

Image source: Getty Images.

Can the business be turned around?

When it comes to reimbursem*nt, ultimately there is only so much blood from a stone that PBMs can squeeze out of pharmacies. The new CEO, Tim Wentworth, comes from the PMB business, where he was previously the CEO of Express Scripts. He is looking to shift reimbursem*nts to a cost-plus model, where the company can benefit when it is able to help slow the inflationary pressures on drug prices on its end. It already uses this type of model in the U.K. with Boots, where pharmacists are able to advise patients and prescribe treatments for seven common health conditions.

However, the company warned that while PBMs have been open to this type of model, it will take time for the industry to shift toward it.

On the VillageMD and other healthcare side of the business, the damage has been done with the investment not working out as planned. The write-down is non-cash, so it is more of an admission of its mistake than anything else, and shows the likelihood that the business will not grow as expected. Instead, the company is working to restructure VillageMD's cost structure and shrink its footprint to improve profitability.

For the quarter, the company's U.S. Healthcare segment was able to flip to positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $17 million and a modest adjusted operating loss of $34 million. At the same time, VillageMD sales were up 20% as it saw same-clinic growth. So, there are, at the very least, signs that the segment will no longer be a drag on the company's results.

Time to buy the stock or stay away?

At aforward price-to-earnings (P/E) ratio of about 5 and enterprise value (EV)-to-EBITDA ratio of 5, Walgreens stock is inexpensive. The latter metric takes into account its net debt and takes out non-cash items.

Walgreens Boots Stock Just Hit Its Lowest Level Since 1998. Time to Buy the Dip or Stay Away? | The Motley Fool (2)

WBA EV to EBITDA (Forward) data by YCharts

The path to recovery for the business is possible, but it's not going to happen overnight, and it's not guaranteed. The company carries a lot of debt, but it also has assets it can look to sell to reduce debt if it needs to in the future. U.K. pharmacy Boots is one option, as it has performed well with retail market share growth for 12 straight quarters.

At this point, Walgreens stock is an option to consider for patient investors with a tolerance for risk.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Walgreens Boots Stock Just Hit Its Lowest Level Since 1998. Time to Buy the Dip or Stay Away? | The Motley Fool (2024)


Is Walgreens Boots a good stock to buy? ›

WBA Stock Forecast FAQ

Walgreens Boots Alliance has 40.75% upside potential, based on the analysts' average price target. Is WBA a Buy, Sell or Hold? Walgreens Boots Alliance has a consensus rating of Hold which is based on 2 buy ratings, 8 hold ratings and 3 sell ratings.

What is the future of Walgreens stock? ›

Stock Price Forecast

The 13 analysts with 12-month price forecasts for WBA stock have an average target of 24.54, with a low estimate of 13 and a high estimate of 35. The average target predicts an increase of 54.15% from the current stock price of 15.92.

What is the target price for Walgreens Boots Alliance? ›

Average RecommendationHold
Average Target Price22.26
Number Of Ratings21
FY Report Date8/2024
Last Quarter's Earnings1.20
6 more rows

What is Walgreens stock prediction for 2024? ›

Walgreens Boots Stock Price Forecast 2024-2025

The forecasted Walgreens Boots price at the end of 2024 is $18.54 - and the year to year change -29%. The rise from today to year-end: +14%. In the middle of 2024, we expect to see $16.91.

Is WBA dividend safe? ›

Overall, it doesn't paint a great picture for dividend investors. Without a profitable business and cash flowing out of its operations, continuing to offer a dividend may prove to be a challenge for Walgreens.

Is WBA undervalued? ›

Either way, we think WBA stock is undervalued at its current levels of $18. WBA stock has suffered a sharp decline of 50% from levels of $40 in early January 2021 to around $20 now, vs. an increase of about 40% for the S&P 500 over this roughly three-year period.

What is the highest Walgreens stock has ever been? ›

The latest closing stock price for Walgreens as of May 30, 2024 is 15.39.
  • The all-time high Walgreens stock closing price was 70.02 on August 05, 2015.
  • The Walgreens 52-week high stock price is 32.89, which is 113.7% above the current share price.

Who are the largest shareholders of Walgreens Boots Alliance? ›

Largest shareholders include Vanguard Group Inc, BlackRock Inc., State Street Corp, Capital World Investors, VTSMX - Vanguard Total Stock Market Index Fund Investor Shares, Geode Capital Management, Llc, VFINX - Vanguard 500 Index Fund Investor Shares, Invesco Ltd., Invesco Qqq Trust, Series 1, and VIMSX - Vanguard Mid ...

Why isn't Walgreens profitable? ›

Walgreens isn't lagging in retail sales because of shoppers unwilling to spend money, Saunders asserted. It is losing money because consumers are going elsewhere for better deals and products. “Basically, Walgreens is losing out because it is just not very good at retailing,” he said.

Who owns Walgreens boots? ›

Walgreens Boots Alliance, Inc. (WBA) is an American multinational holding company headquartered in Deerfield, Illinois, which owns the retail pharmacy chains Walgreens in the US and Boots in the UK, as well as several pharmaceutical manufacturing and distribution companies.

What is the forecast for Walgreens stock? ›

Based on short-term price targets offered by 14 analysts, the average price target for Walgreens Boots Alliance comes to $22.57. The forecasts range from a low of $16.00 to a high of $35.00. The average price target represents an increase of 40.8% from the last closing price of $16.03.

Why does Walgreens want to sell Boots? ›

Walgreens bought Boots in 2014, but it has come under pressure to sell the British firm to focus on its US business. Boots sales in the last quarter were 3% higher than for the same period last year.

What is Walgreens Boots Alliance stock prediction for 2025? ›

Walgreens Boots Alliance stock prediction for 1 year from now: $ 20.49 (27.81%) Walgreens Boots Alliance stock forecast for 2025: $ 14.83 (-7.47%)

What stock will boom in 2024? ›

9 Best Growth Stocks to Buy for 2024
StockImplied upside over May 29 close*
Tesla Inc. (TSLA)19.2%
Mastercard Inc. (MA)22%
Advanced Micro Devices Inc. (AMD)21.1%
Intuit Inc. (INTU)19.5%
5 more rows

What is the future of Walgreens? ›

Expect a leaner, smaller footprint

One of the things that's likely to happen over the next decade is that Walgreens becomes smaller in size. The company has a lot of physical store locations, but that means a higher level of staffing needs and resources. It also comes with more costs and challenges.

What is the prediction for boot stock? ›

Based on analyst ratings, Boot Barn Holdings's 12-month average price target is $119.08. What is BOOT's upside potential, based on the analysts' average price target? Boot Barn Holdings has 5.15% upside potential, based on the analysts' average price target.

How often does Walgreen and Boots pay dividends? ›

Walgreens Boots Alliance, Inc.'s ( WBA ) ex-dividend date is May 20, 2024 , which means that buyers purchasing shares on or after that date will not be eligible to receive the next dividend payment. Walgreens Boots Alliance, Inc. ( WBA ) pays dividends on a quarterly basis.

Is Walgreens Boots Alliance a good company to work for? ›

Walgreens Boots Alliance has an overall rating of 3.3 out of 5, based on over 2,186 reviews left anonymously by employees. 49% of employees would recommend working at Walgreens Boots Alliance to a friend and 42% have a positive outlook for the business. This rating has improved by 2% over the last 12 months.

Is WBD a good stock to buy? ›

Analyst Ratings

The average analyst rating for Warner Bros. Discovery stock from 20 stock analysts is "Buy". This means that analysts believe this stock is likely to outperform the market over the next twelve months.


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