Walgreens Boots Alliance, Inc.

WBA Details

Walgreens Boots Alliance, Inc. (NASDAQ: WBA) is a large retail drugstore chain with over 13,000 locations in 50 states and nine countries. Its fundamental approach consists of brick-and-mortar retail pharmacy outlets in high-traffic areas that serve nearly 80% of the US population. Currently, the company has a 20% of the domestic prescription medicine market.

Why should Investors Sell?

• Higher Leverage: In Q1FY22, the company's total long-term debt was USD 12.16 billion, up 1.50% from USD 11.98 billion in Q1FY21 and 40.62% from USD 8.65 billion in Q4FY21.
• Competition from Generic Drugs: The prescription rate of generic pharmaceuticals and the rate at which new generic drugs are released have an impact on segment sales, gross margin, and gross profit. Because a variety of events outside of the company's control can influence the timeframe of an overall change. The company has significant uncertainty in projecting when such adjustments will occur and how they will affect specific times in the future.
• Weak Current Ratio: In Q1FY22, the company's current ratio is 0.83x, compared to the industry median of 1.33x, indicating that liabilities are increasing.
• Trading near 52 Weeks High: The company’s stock is trading close to the 52-week high. Thus, it may face retracement from the overstretched levels.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

WBA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

WBA’s stock price has surged 14.39% in the past six months and is currently leaning towards the higher end of its 52-week range of USD 43.62 to USD 57.05. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 58.02. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 43.43.

Considering the company's growth prospects, competition in pharmacy, current valuation, and technical indicators, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "SELL" rating on the stock at the closing price of USD 53.18, down 0.65% as of January 20, 2022.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

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