Walgreens Boots Alliance (WBA -0.22%) is shaping up to be one of the least popular stocks of 2024. With its share price down nearly 65% year to date, the pharmacy-chain operator isn't making it on many holiday wish lists.
Yet the company still has believers. One of them is TD Cowen analyst Charles Rhyee, who recently reiterated his bullish take on the troubled company. Here's why he thinks Walgreens has a brighter future than many market players imagine.
Fourth-quarter results coming soon
Rhyee is maintaining his buy recommendation on Walgreens at a price target of $16 per share. That's a robust 74% higher than the company's most recent closing price.
The prognosticator's note came several days before Walgreens was scheduled to unveil the final set of quarterly results for its 2024 fiscal year. Like other analysts tracking the stock, Rhyee is expecting a slump in profitability. He's estimating the pharmacy conglomerate will post a non-GAAP (adjusted) net profit of $1.71 per share for fiscal 2025, which is well below the $2.85 consensus pundit forecast for this year.
Yet the analyst expressed hope that in the company's earnings release, management would provide a clear picture of its plans for store closures and the general optimization of its business. He's also hopeful that it will supply a timeline for the possible sale of its majority stake in flailing clinic operator VillageMD.
The low valuations are tempting, but...
Walgreens is suffering from a general slump in the U.S. pharmacy sector and its own ill-considered moves like the VillageMD buy-in. Investors might be tempted by the company's basement-low valuations -- like, for instance, a forward price-to-earnings ratio (P/E) barely above 4. But until management offers concrete and workable strategies for fixing its problems, I would be a seller of the stock.
