What happened

The share price of Walgreens Boots Alliance (WBA -1.26%) was moving up on Tuesday, rising 3% higher shortly after the opening bell. At noon ET, it was still up about 1.8%, trading at $41.32.

It looked to be a positive day on Wall Street, as all three indexes up in the morning, led by the Dow Jones Industrial Average, which had gained about 283 points as of noon ET.

So what

The catalyst for Walgreens on Tuesday was a vote of confidence by a Wall Street analyst at Cowen. Charles Rhyee boosted Walgreens' price target to $54 per share, from $43, and upgraded it to outperform from market perform.

Rhyee cited the acceleration of Walgreens' transition from primarily a retail pharmacy to a healthcare services business. The recent acquisitions of CareCentrix, a home care provider, and more recently, Summit Health-CityMD, via its VillageMD unit, are two major reasons for the acceleration. 

Summit Health, a provider of primary, specialty, and urgent care, has more than 680 locations throughout the United States, primarily in the Northeast and Oregon.

Since the Summit Health deal was announced on Nov. 7, Walgreens has gotten upgrades from Truist, Deutsche Bank, and JPMorgan Chase.

Now what

Cowenʻs price target of $54 per share would represent a 31% increase for Walgreens. In his note to investors, Rhyee cited the stock's discounted valuation, with a forward price-to-earnings (P/E) ratio of only 8.5. "We view the risk/reward as very attractive, and believe investors should take the risk, given near-term support from 4.8% dividend yield," Rhyee wrote, reported CNBC.

The analyst expects to see the healthcare services business, called US Healthcare, representing 13% of adjusted operating income by fiscal year 2025, up from a net loss this most recent quarter. That, in turn, would accelerate EPS growth by 12% to 13% in FY25, he said, up from the 6% to 8% push projected for FY23, the analyst said.

In its most recent earnings report, Walgreens raised its sales target for the US Healthcare segment to $11 billion to $12 billion by FY2025, up from the previous target of $9 billion to $10 billion. By comparison, the segment had $622 million in sales in the fiscal fourth quarter. The company expects this segment to hit positive adjusted EBITDA in fiscal year 2024.

It is an excellent dividend stock as well, as a Dividend Aristocrat, with 47 straight years of dividend increases and a yield of 4.7%. Overall, it looks like a good buy right now