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Walgreens: Strong 4Q17 Results Support the Falling Stock Price

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Oct. 30 2017, Updated 11:33 a.m. ET

Walgreens in the stock market

Walgreens Boots Alliance’s (WBA) strong 4Q17 results were received well by the market. The company’s stock price rose 3% and closed at $69.36 on October 25. It was the biggest one-day gain for the company this year. Walgreens stock has been under pressure for the last several months because of increasing pessimism in the US drugstore industry.

Currently, Walgreens is trading 27% below its 52-week high price. It has lost 16% YTD (year-to-date) (as of October 25, 2017). In comparison, CVS Health (CVS) has lost 4.3% YTD, while Rite Aid (RAD) has lost 78% to date.

Walgreens has underperformed the S&P 500 Food and Staples Retail Index (+2% YoY) and the S&P 500 Index (SPX) (+14% YoY).

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Analysts’ recommendations

Analysts maintained their recommendations on Walgreens after its 4Q17 results. The only target price revision on October 25 was by Cowen and Company. The brokerage house reduced its target price on Walgreens to $83 from $88, while reaffirming its “outperform” rating.

Walgreens continues to be rated a 2.1 on a scale of one (strong buy) to five (sell). The company is covered by 24 Wall Street analysts. For Walgreens, 67% of the analysts recommend buying the stock, while 33% suggest holding it. There aren’t any sell recommendations.

In comparison, CVS is rated a 2.2 with 60% “buy” and “40%” hold recommendations.

Investors looking for exposure to Walgreens and CVS can consider the Van Eck Retail ETF (RTH), which invests ~9% of its portfolio in the two companies.

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