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Could Walgreens Boots Alliance Stock Be a Smart Bet Now?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs

Could Walgreens Boots Alliance Stock Be a Smart Bet Now?

Walgreens Boots Alliance Inc. stocks are making a significant upward move, currently trading up by 6.16 percent on Friday. This surge can be largely attributed to recent news highlighting robust quarterly earnings and strategic advancements in digital health initiatives. The market’s positive response reflects investor confidence in the company’s strong financial health and innovative strides in the healthcare domain.

  • Walgreens Boots Alliance is set to announce its Q4 earnings for fiscal 2024 on Oct 15, 2024, with a follow-up management call.
  • At TD Cowen’s 9th Annual FutureHealth Conference, Walgreens will highlight its healthcare initiatives with Chief Clinical Trials Officer, Ramita Tandon, delivering a keynote.
  • JPMorgan has recently reduced Walgreens Boots Alliance’s price target to $15, while maintaining an Overweight rating.
  • Walgreens has announced it will close stores on Thanksgiving, except for select 24-hour locations and pharmacies, ensuring healthcare needs are met.
  • TD Cowen’s revised price target for Walgreens Boots Alliance is $16, citing a slower U.S. retail turnaround due to fewer store closures.

Candlestick Chart

Live Update at 14:38:34 EST: On Friday, September 27, 2024 Walgreens Boots Alliance Inc. stock [NASDAQ: WBA] is trending up by 6.16%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Quick Overview of Walgreens Boots Alliance Inc.’s Recent Earnings Report and Key Financial Metrics

Walgreens Boots Alliance is a familiar sight in many neighborhoods, but how is their financial health shaping up? The company is preparing to release its Q4 earnings report for 2024, which will be followed by a management conference call. This is a prime opportunity for investors to get insights into the company’s performance and future plans.

Chart Data Insights: Date: Multiple Cycles

Reviewing WBA’s recent stock performance, we see movement reflecting both market optimism and fluctuating sentiment. For example, on Sep 27, 2024, the stock opened at $8.61, hitting a high of $9.20 before closing at $9.04. These patterns indicate potential volatility and opportunity but also caution.

The market’s reaction to the company’s financials, notably the reduction of the price target by JPMorgan to $15, comes amid diverse analyst opinions. This followed TD Cowen’s downward adjustment to $16 due to slowed store closures, contrasting their previous higher expectations.

Financial Reports and Key Ratios

Delving into the financial reports, Walgreens Boots Alliance displays mixed figures. Their revenue for 2024 is reported at $139.08B, translating to $161.11 per share. However, profitability metrics like net income depict a mixed story, with a net income from continuing operations at just $230M. This points to operational challenges, perhaps exacerbated by an adverse consumer environment and changes in the pharmacy industry.

The company’s valuation measures also show a notable downward trend. Despite a gross margin of 18.4%, the overall profit margin is a concerning -8.67%, revealing deeper operational problems. Particularly, the price-to-sales ratio stands very low at 0.05, indicating low market confidence.

More Breaking News

Financial Strength: Burdened by Debt

One of the considerable challenges highlighted is Walgreens’ debt levels. The total debt to equity is 2.4, signifying a high leverage ratio. This is compounded by a low quick ratio of 0.3, questioning the company’s ability to meet short-term obligations without liquidating inventory. Furthermore, the company recorded a free cash flow of $742M, which while positive, is overshone by a hefty long-term debt.

Management effectiveness is notably weak. Return on equity (ROE) is disappointingly low at -0.68%, and return on assets (ROA) stands at a meager -0.16%. These numbers indicate poor utilization of equity and assets in generating profits.

Market Implications: Earning Calls and Future Projections

As Walgreens Boots Alliance prepares for its Q4 and fiscal year 2024 earnings call, investors will be particularly keen on management’s commentary about future strategies, especially regarding their retail optimizations. Will the reduced number of store closures be enough to propel a turnaround? The stock’s recent 0.22% increase to $9.27 might be a glimmer of hope, but it remains cautiously optimistic.

Financial Relationships and Market Reactions

Walgreens Boots Alliance’s Market Position Amid Healthcare Shifts

In recent times, Walgreens Boots Alliance has focused on expanding its healthcare roles, prominently showcasing its involvement during the TD Cowen’s 9th Annual FutureHealth Conference. As Ramita Tandon, Chief Clinical Trials Officer, takes the stage to discuss Walgreens’ integrated healthcare services, the market is likely to see ripples of interest.

Healthcare, a domain ripe with innovation, faces increasing demand for integrated services. Walgreens’ visibility in such events not only reinforces its position but also offers glimpses of strategic shifts towards more comprehensive healthcare offerings. This evolution could steer investor sentiment upward, contingent on the efficacy and adaptability of their services.

Analysts Reactions and Revised Price Targets

JPMorgan and TD Cowen, both significant players in the financial advisory space, have adjusted their price targets for Walgreens Boots Alliance, reflecting perceived challenges and slower-than-expected progress in the U.S. retail landscape. A reduction to a $15 price target by JPMorgan signals cautious optimism, as evident in their retained Overweight rating. Despite the declining price target, JPMorgan’s confidence in Walgreens’ potential hints that the firm sees avenues for recovery if certain strategic milestones are met.

TD Cowen’s adjustment, down to $16, similarly indicates a wait-and-see approach. The pivotal factor here is Walgreens’ progress in its optimization plan. Initially, the closure of around 2,000 stores was anticipated. However, with numbers scaling back to just over 1,000, the extended turnaround timeline indicates that operational efficiencies may take longer to materialize.

Potentially Pivotal Earnings Call

Anticipation around the Q4 and fiscal year 2024 earnings call is palpable. Scheduled for Oct 15, 2024, this event stands as a crucial indicator of the company’s near-term prospects. Investors and analysts alike will dissect the reports for hints of strategic pivots and performance indicators. In the lead-up, any incremental data or guidance issued might sway preemptive trading.

Implications of Store Closures on Thanksgiving: A Strategic Move

Customer Relations and Healthcare Accessibility

The decision to close majority of stores on Thanksgiving, retaining operations only at key 24-hour locations and pharmacies, could play as a mixed signal to the market. While the move might be seen as aligning with a family-friendly corporate ethos, it also highlights an acute recognition of maintaining essential healthcare access. With healthcare needs being a perennial priority, this move underscores Walgreens’ community-centric approach.

Retail Impact and Stock Movement

Operational store closures on a high sales potential day might initially seem like a revenue-losing strategy. However, balancing this perspective are potential long-term benefits in customer loyalty and brand goodwill. The decision reflects a nuanced understanding of brand perception management, potentially stabilizing stock movements post-announcement.

Market Sentiment Driven by Earnings and Financial Adjustments

Q4 Earnings Forecast and Analyst Projections

As we approach the Q4 earnings call, the market sentiment is a mix of cautious optimism and apprehensive wait-and-see. The forecast will undeniably shape immediate market actions. Walgreens Boots Alliance’s fiscal health shown in Q3’s snapshot hints at pressures but also glimpses of strategic realignments. Analysts will scrutinize revenue trajectories, thematic adjustments, and broader market impacts such as those from consumer dynamics and operational efficiencies.

Consolidation of Healthcare and Retail Synergies

Walgreens’ amplified focus on healthcare, demonstrated emphatically in industry forums, could begin to yield financial dividends if properly executed. However, these gains are likely to be gradual. The realignment to capture healthcare synergies should be monitored through incremental refinements in service optimization and strategic partnerships.

Closing Thoughts

As Walgreens Boots Alliance nears its pivotal Q4 earnings announcement for fiscal 2024, the market stands on a threshold of anticipation. With revised price targets from leading financial advisories shedding light on operational hurdles, it’s clear that the company’s roadmap faces significant challenges. However, strategic movements in healthcare participation and prudent operational adjustments—seen through store closure decisions—offer a balanced perspective of potential upsides and inherent risks.

The company’s recent financial metrics present a picture of cautious optimism. Although burdened by high debt, negative profitability ratios, and stretched valuations, the intrinsic potential for strategic pivots presents opportunities for patient investors looking beyond the immediate horizon.

In conclusion, the upcoming earnings call will be a linchpin event determining Walgreens Boots Alliance’s near-term stock trajectory. Primed investors should weigh these facets as they navigate the intricate dynamics of this storied retail and healthcare entity.

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Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”