Shares of Walgreens Boots Alliance Inc. experienced a rally on Monday after JP Morgan expressed bullish sentiments towards the healthcare services and pharmacy chain. The decision was based on the anticipation that the company’s new CEO, Tim Wentworth, will address the issues that have been negatively impacting the stock.
JP Morgan analyst Lisa Gill stated in a research note to clients that she believes this marks the beginning of a new era for Walgreens. Consequently, she upgraded the stock’s rating from neutral to overweight. Gill also raised her price target for the stock to $30 from $27, which implies a potential upside of approximately 41% from Friday’s closing price of $21.26.
The stock (WBA, +1.43%) surged 3.0% prior to the market open, making it the top gainer in both the Dow Jones Industrial Average (DJIA) and the S&P 500 index (SPX) during premarket trading.
Despite the recent rally, on Friday, the stock had faced a decline of up to 2.3%, hitting a 25-year low of $20.48 in intraday trading. However, it managed to rebound and close the day with a 1.4% gain. Over the past two quarters, Walgreens has fallen short of earnings expectations due to high costs, a slower-than-expected growth rate in its healthcare business, and a significant decline in COVID-19 vaccinations.
It remains to be seen how the new CEO will navigate these challenges and lead the company towards a positive trajectory. Investors are hopeful that this change in leadership will bring about much-needed improvements for Walgreens Boots Alliance Inc.
Walgreens has an Opportunity to Improve Performance, Says J.P. Morgan Analyst
J.P. Morgan analyst Lisa Gill expresses optimism about Walgreens’ future prospects, stating that the company has the potential to overcome obstacles and enhance its performance in the coming quarters. With a refreshed healthcare-focused management team and a lowered but credible bar, Walgreens is poised to address various challenges.
After the announcement of CEO Rosalind Brewer stepping down, Walgreens appointed Tim Wentworth as its new CEO. Wentworth previously served as the CEO of Cigna Group’s health services organization, Evernorth.
Gill acknowledges that Walgreens’ stock has experienced a steady decline in value over the last decade. However, she believes that the current stock valuation already incorporates the existing uncertainty surrounding the company. As a result, she suggests that there is a “favorable” risk-versus-reward opportunity for investors at the current stock prices.
Highlighting her confidence in Wentworth and his team’s ability to overcome short-term hurdles, Gill expects the company’s earnings multiple to expand over time.
According to FactSet, out of the 16 analysts covering Walgreens, only four hold a bullish sentiment towards the stock. The majority of analysts (11) have a neutral stance, while only one analyst is bearish.
Walgreens’ stock performance has been disappointing, with a 30.2% decline in the past three months and a significant 43.1% drop year-to-date. This makes Walgreens the worst-performing component of the Dow index during these periods. In comparison, the Dow has experienced a decline of 6.0% over the past three months and a marginal decrease of 0.1% this year.