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Walgreens on the Street: What the Analysts Say after Fiscal 2Q17

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Wall Street’s reaction to WBA’s second quarter results

While Walgreens (WBA) delivered mixed 2Q17 results, CEO (chief executive officer) Stefano Pessina’s optimism about the pending Rite Aid (RAD) deal has been well received by the analyst community.

John Heinbockel of Guggenheim maintained a “buy” rating on WBA, issuing a price target of $100. While Heinbockel was disappointed with the company’s “choppy” second quarter performance, he acknowledged the management’s decision of maintaining its fiscal 2017 guidance, the CEO’s positive comment on the RAD deal, and the authorization of the $1-billion buyback plan.

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Wall Street’s recommendations for WBA

There have been no changes in ratings by any of the analysts after the company reported its 2Q17 results. The 25 analysts who cover Walgreens have collectively set a rating of 2.0 on the stock, on a scale of 1.0 (“strong buy”) to 5.0 (“sell”). The company thus has a better rating than Rite Aid (RAD), which has a 2.6, and CVS Health (CVS), which has received a 1.9.

Wall Street continues to remain bullish overall on WBA’s stock, with 72% of the analysts recommending a “buy” for the stock and the remaining suggesting a “hold.” There are currently no “sell” ratings on the company, but Rite Aid and CVS don’t have any “sell” ratings either.

Target prices

Wall Street has assigned an average price target of $93.76 to Walgreens, indicating a 15% upside over the next 12 months. The individual target prices on the company thus range between $79 and $100.

Rite Aid, which is currently trading at $4.59, has a price target of $6.29. Walgreens has offered a price between $6.50 to $7.00 to Rite Aid’s shareholders in the acquisition, but Deutsche Bank recently warned that Rite Aid’s share price could be reduced to half—if the proposed deal between Walgreens and Rite Aid falls apart.

ETF investors seeking to add exposure to WBA can consider the iShares US Consumer Services ETF (IYC), which invests 2.2% of its portfolio in Walgreens Boots Alliance (WBA).

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