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Walgreens Shares Tumble After Dividend Halt

Ellis HobbsAvatar
Written by Ellis Hobbs
Reviewed by Jack Kellogg Fact-checked by Tim Sykes

Walgreens Boots Alliance Inc. is potentially impacted by a surge in unionization efforts, reflecting in Monday’s trading as stocks have been down by -4.86 percent.

Key Developments Impacting Stock

  • Shares of Walgreens Boots Alliance experienced a significant drop, closing down nearly 12% after reports emerged accusing the company of mismanaging opioid prescription dispensation.

Candlestick Chart

Live Update At 17:20:33 EST: On Monday, February 03, 2025 Walgreens Boots Alliance Inc. stock [NASDAQ: WBA] is trending down by -4.86%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

  • The big move down was fed by the company’s recent suspension of its quarterly cash dividend – a strategic choice geared towards reinforcing its balance sheet for long-term strength.

  • Despite negative market reactions, some analysts see the dividend cut as a potential long-term positive, though the immediate impact is less than favorable with stocks dropping roughly 10%.

  • The suspension of prospective acquisition talks with Sycamore Partners adds further stress, contributing to an overall slide in the stock price.

  • Securities claims loom as the Rosen Law Firm investigates Walgreens over potentially misleading business practices, spurring further uncertainty.

Analyzing Walgreens’ Recent Financial Performance

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The financial waters for Walgreens have been rather choppy recently. The decision to suspend the dividend aimed to address liquidity issues doesn’t change the fact that their financial statements reveal a rather grim picture. The company experienced a 6% dip in net income, which correlates unfavorably with the 10% fall in shares after the dividend announcement. The EBITDA, earnings before interest, taxes, depreciation, and amortization, stood at a low $208M, marking a decrease from previous figures – shrinking margins only compound the problem.

Analysts point out some key ratios that could guide investor sentiments. The company is witnessing a negative EBIT margin at -9.2%, posing questions on earnings performance. With a gross margin of 17.6%, Walgreens has room to maneuver, though the path is steep – especially with a revenue base that’s cooling after a modest 3.68% growth over three years.

More Breaking News

Recent times have not been kind to the company, with a $605M loss from continuing operations, an indicator that rough seas lie ahead. The pressurized finance sheets echo a stark reality – total debt remains unwaveringly high at $3.09B against equity. The leverage ratio, signaling financial risk, is at 7.9, underscoring the weight of their obligations. Investors and stakeholders continue to observe how these factors press upon Walgreens’ famed balance sheet.

Impact of Legal and Strategic Decisions

Many traders speculate around the potential effect of ongoing legal challenges facing Walgreens. The investigation into their handling of opioid prescriptions by the U.S. Department of Justice has greatly undermined confidence in the company. Each lawsuit narrative threads through investor discussions, exacerbating stock turmoil.

Walgreens’ move to pause dividend payments served as an eyebrow-raiser, but for insiders, it may be a calculated stride towards a strategic overhaul. Despite the hue and cry from the market, some finance professionals see this as a chance for Walgreens to focus resources inward on critical areas of growth and development. For one trader, an anecdote captures the moment: “Sometimes tearing the wallpaper down reveals the cracks in the wall – a first step towards rebuilding.”

With acquisition talks with Sycamore Partners dwindling to whispers, Walgreens remains at a crossroad. Could this strategic reset pave the way for a leaner, more resilient entity? Or will it lag in the shadows of confidence deficit?

Conclusion

In the realm of Wall Street, Walgreens Boots Alliance finds itself on shaky ground. While its decision to halt dividends in the pursuit of restructured finance may bode well in the long run, market immediacy continues to cloud trader outlooks. Legal challenges and dwindling talks of deals paint a turbulent picture.

The fate of Walgreens, much like any storied corporate giant thrust into the throes of lawsuits and strategic shifts, lies in its ability to adapt and evolve. As millionaire penny stock trader and teacher Tim Sykes says, “The goal is not to win every trade but to protect your capital and keep moving forward.” The coming days will reveal whether Walgreens can not only steady the ship but once again chart a course towards prosperity in the eyes of its stakeholders. As the curtain rises on these developments, many look on with analysis and anticipation.

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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”