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Here’s Why Walgreens Stock Crashed despite Strong Q3 Results

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Nov. 20 2020, Updated 2:35 p.m. ET

Walgreens stock after its fiscal Q3 results

As we’ve seen in this series, Walgreens Boots Alliance (WBA) posted better-than-expected fiscal third-quarter results before the market opened on June 28. Management also raised the lower end of the company’s fiscal 2018 earnings guidance and announced plans to repurchase up to $10 billion of its shares and increase its dividends by 10% to $0.44.

Investors reacted positively to the results, and the stock rose 1.5% in pre-market trading. However, the celebrations were short-lived as Walgreens’s good work was washed away by online juggernaut Amazon’s (AMZN) latest endeavors.

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Soon after Walgreens’s results, Amazon announced its plan to acquire PillPack, an online pharmacy company. WBA stock crashed immediately, falling as much as 11% to $59.07 on June 28 before finally settling at $59.70, a 9.9% fall from the previous day’s closing price. Walgreens was the biggest drag on the Dow Jones as well as the S&P 500 Index. The company is now trading 40% below its 52-week high and has fallen ~18% year-to-date.

The entire pharmacy supply chain felt the impact. Competitors CVS Health (CVS) and Rite Aid (RAD) fell 6% and 11%, respectively, while Cardinal Health (CAH), AmerisourceBergen (ABC), and McKesson(MCK) fell 4.8%, 4.4%, and 6.1%, respectively.

Analysts’ actions after Walgreens’s fiscal third-quarter results

Some harsh analyst actions followed Walgreens’s bloodbath in the stock market. Bank of America Merrill Lynch lowered the company from “neutral” to “underperform.” Baird downgraded it from “outperform” to “neutral,” and Jefferies cut it from “buy” to “hold.”

As a result, Walgreens’s overall rating crashed from 2.3 to 2.5 after the results. Ratings are done on a scale of 1 for “strong buy” to 5 for “sell.”

Investors looking for exposure to WBA through ETFs can invest in the SPDR Consumer Staples Select Sector ETF (XLP). WBA makes up 3.5% of XLP.

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