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Walgreens Boots Alliance (NASDAQ:WBA) has had an outstanding crash in the past few years, making it the worst-performing Dow Jones company. While the Dow Jones and S&P 500 indices have risen by double digits this year, WBA is languishing at the lowest level since July 2012.
Headwinds remain
Walgreens Boots Alliance has been an embattled company for a long time. Its stock peaked at $74 in July and has now plunged to $22.7. This decline has seen its total market cap retreat to just $20 billion.
Walgreens is not the only similar company in trouble. Rite Aid, a major company with billions in revenue annually is considering filing for bankruptcy. CVS Health stock price has dropped by more than 34% in the past 12 months.
Walgreens is facing significant headwinds. For example, there are signs that the company’s revenue growth is slowing. Its revenue jumped from $121 billion in 2020 to over $132.5 billion in 2021. It then grew slightly to $132.7 billion in 2022.
Walgreens’ profits have been a bit elusive because of its opioid settlement. It lost over $3.8 billion loss in November 2022. The most recent results showed that the company’s loss was $48 million. Excluding these opioid charges, Walgreens is still a highly profitable company.
Walgreens Boots Alliance is also seeing slow growth in its retail outlets in the US. To deal with this slowdown, the company decided to VillageMD in a $5.2 billion deal. The goal is to create a holistic healthcare company that offers numerous solutions to users. VillageMD now has an annual run rate of over $8 billion.
Like other retailers, Walgreens Boots Alliance is suffering from macro headwinds that are affecting consumer spending and retail sales.
Is WBA a good stock to buy?
A case for investing in Walgreens Boots Alliance stock can be made. It is a simple business that has a strong market share in the United States. The challenge is that CVS, its biggest competitor, has created a one-stop shop for pharmacy, treatment, and insurance.
Most importantly, the company is working on a turnaround. It is selling a large stake in AmerisourceBergen and is considering exiting its Boots business. It will either sell the company or list it either in 2023 or 2024. Still, Walgreens carries over $37 billion of debt against $917 million of cash.
Walgreens is also clearly an undervalued company trading at a forward PE of ~5. In contrast, CVS has a forward multiple of 7x while Walmart and Target have 24 and 16. This makes it an outright bargain since the S&P 500 average is over 18x.
Walgreens also has a safe dividend yield of 8.45% that is covered by a payout ratio of 46.60%. Therefore, fundamentally, there is a case for investing in Walgreens stock now that Roz Brewer stepped down.
However, technically speaking, it seems like bears have the momentum for now. I would only recommend it if it rebounds and moves above the 50-day, 100-day and 200-day moving averages.
Watch here: https://www.youtube.com/embed/CTwm4L3zDJc?feature=oembedThe post Walgreens (WBA) stock: Is the worst Dow Jones constituent a buy? appeared first on Invezz.
