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Walgreens Stock: Why Analysts Lowered the Target Price

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Mar. 28 2019, Updated 8:03 a.m. ET

Earnings pressure

Recently, numerous analysts lowered their target price on Walgreens Boot Alliance (WBA) stock. On March 27, Cowen lowered its target price to $66 from $75. At the beginning of March, Morgan Stanley reduced its target price to $67 from $77. UBS cut its target price to $65 from $70, while J.P. Morgan lowered its target price to $84 from $91. Baird cut its target price to $67 from $70 per share.

Higher reimbursement pressure on earnings, weakness in the United Kingdom, and tough YoY (year-over-year) comparisons are keeping analysts on the sidelines. The FDA’s stance on selling tobacco products to minors also impacted investors.

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Among the 26 analysts tracking Walgreens, 16 recommended a “hold,” seven recommended a “buy,” and three recommended a “sell.” Analysts have a target price of $72.86 per share on Walgreens, which implies an upside of 17.1% based on its closing price of $62.23 on March 27. In comparison, analysts recommended a “buy” on CVS Health (CVS) stock.

Valuation

Walgreens stock trades at 9.7x it’s fiscal 2019 estimated EPS of $6.43, which looks attractive based on the projected growth rate of 7% in the EPS and a current dividend yield of 2.9%.

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