Walgreens Boots Alliance (Ticker Symbol: WBAWealth Strength IndexAAPL is Extremely Up and trending Up) reported earnings late last week that beat on the top and bottom line thanks to a rise in prescription drug sales. The pharmacy giant reported an earnings per share beat of $1.47 per share vs. Wall Street analysts’ expectations of $1.43 per share. Walgreens also reported a revenue beat of $34.59 billion vs. Wall Street analysts’ expectations of $34.46 billion. Chief Executive Officer Stefano Pessina was pleased with the results after coming off of what he considered “the most difficult quarter since the company was formed.”
Walgreens is having minor issues with a portion of its revenue due to lower pharmacy margins and also slower front-store sales domestically. Internationally, Walgreens is having some weakness in its United Kingdom drugstores. Chief Financial Officer James Kehoe announced that the company will close over 175 Boots drugstores in the UK this year. Walgreens reiterated its year-end forecast of earnings to be roughly flat, which the company announced last quarter.
Walgreens’ stock started off in 2018 spiking higher and then spending the first and second quarters grinding lower. The stock found support just below the $60.00 price level, after gapping down 9% from a negative earnings release. It then went on a tremendous rally, reclaiming both its 100 and 200-day Moving Averages, and putting in a 6-month long uptrend that rallied over 85% from its 2018 lows. The stock sold off and broke below the uptrend it started in December of 2018, putting in its first oversold condition in its Relative Strength Index since 2017, as shown on the charts with the purple squares.
The start to 2019 began positively for Walgreens investors with its stock rallying over 11% to start the year before finding technical resistance at the 100-day Moving Average around $75.00.
Unfortunately for investors, the stock took quite the tumble, trading back below both of its major moving averages and establishing its new downtrend. It ended up giving back all of its gains and then gapped below its 2018 lows, after bottom news from its first-quarter earnings release. The stock is currently finding trendline resistance from the downtrend it began in the fourth quarter of 2018.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 13 analysts offering 12-month price targets, the average price target for Walgreens’ stock is $119.33. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $54.55.
Walgreens and other pharmacies have been under pressure as of late because insurance companies are paying pharmacies less to fill prescriptions. Consumers continue to move to purchase household items online instead of at drugstores and these combined have added some pressures to Walgreens. Investors in the space should look to Walgreens’ competitor CVS’s earnings release on August 11th for fresh news within the sector.