On June 23, 2016, as the United Kingdom’s voters chose to exit the European Union (or EU), global equities, currencies, bonds, and commodities markets came under pressure. The S&P 500 index fell by 3.6% on the day following the Brexit announcement.
Brexit and the S&P 500 Food and Stables Retail Index
The seven-company S&P 500 Food and Stables Retail Index, of which Walgreens (WBA) is a part, fell by ~0.9% on June 24. Walgreens was the biggest loser among the index companies, falling by ~3.9% on the day. The company has fallen by 6.1% in the three days following the Brexit announcement. Its year-to-date losses stand at 3.8%.
Other index companies CVS Health (CVS), Costco (COST), and Walmart (WMT) fell by 0.5%, 0.9%, and 0.2%, respectively, after the Brexit announcement. Kroger (KR), however, was not impacted by Brexit and rose by 1.4% on June 24.
The SPDR Consumer Staples Select Sector ETF (XLP), which invests 3.9% of its holdings in WBA, fell by 1.9% following the Brexit announcement.
Reason behind WBA’s stock price fall
WBA’s stock price sensitivity to Brexit can be understood from its strong presence in the United Kingdom. The company operates more than 2,500 stores in the United Kingdom under the Boots banner.
Boots is also one of the leaders in the optical market in the United Kingdom, with around 650 practices. The company derived ~11% of its total sales from the United Kingdom in fiscal 2015.
Wall Street’s view on WBA
WBA’s current stock price stands at $79.9, ~15% below its 52-week high price of $97.3. Wall Street is positive about WBA and sees potential for a stock price revival. The stock has a consensus target price of $94.0, indicating a return of ~15% over the next 12 months.
Read the next section to learn about Walgreens’ dividend policy.