Pharmacy and retail company Walgreens Boots Alliance (WBA 0.57%) jumped as much as 8.8% in trading on Thursday as investors think shares have finally hit bottom. Shares are up 8.4% at 1:30 p.m. ET.
Recovery or bounce off the bottom?
There wasn't significant news out about Walgreens Boots Alliance today, but the company may be seeing a bit of a short squeeze. Shares have rallied the last two days, and a sharp rise could be putting pressure on investors betting against the stock.
There are plenty of challenges for pharmacies right now, highlighted by the bankruptcy of Rite Aid earlier this year. Walgreens Boots Alliance has reported a $3.1 billion loss in the past year, but shares are trading for just 0.14 times sales, so there's an argument this could be a great value stock if the company can return to profitability.
A risky bet
Fundamentally, the business is heading in the wrong direction. Revenue has flatlined, and operating income is dropping. There just simply isn't growth or an ability to consolidate the industry further, so I'm not sure how the bottom line improves from here.
Investors betting on a short squeeze may be having a great day, but that's not what's going to drive the stock long term. A stock's value ultimately follows the business, and without a turnaround, this will be a short-lived pop in shares.
I am staying out of the move today because it's not driven by a fundamental improvement in the business, which may not be coming anytime soon.
