Walgreens Boots Alliance Inc. (NASDAQ:WBA) shares are wrapping up their most dismal month in over five years as the troubled drugstore chain grapples with a challenging turnaround, prompting investors on Wall Street to abandon the stock.
The stock plummeted 18% in April, hitting its lowest level in nearly 26 years, after the company revised its outlook downward, citing reduced consumer spending, and disclosed that the IRS is seeking to recover $2.7 billion in unpaid taxes.
With losses recorded in all but one of the past eight years, Walgreens faces significant debt following an acquisition spree. Despite this, the company is banking on a strategic review of its businesses to regain investor confidence and spur growth.
Shams Afzal, a portfolio manager at Carnegie Investment Counsel, remarked, “The market has almost given up on this company given how long some of the challenges have remained. The stock price is reflecting all of these pressures.”
The company has undergone management changes, with former CEO Roz Brewer departing nearly eight months ago amid difficulties in expanding into healthcare. The stock lost approximately half its value during her tenure.
Walgreens, based in Deerfield, Illinois, has also seen turnover in key executive positions over the past year, including its CFO, CIO, and CMO.
Reports suggest that the company is discussing separating from Boots, its UK pharmacy chain, and exploring options for Shields Health Solutions, its specialty pharmacy business.
Despite these efforts, Wall Street remains cautious. Twelve of the analysts covering the stock rate it as a hold, with three recommending buying shares and four suggesting selling, according to Bloomberg data.
Stephanie Davis, an analyst at Barclays, highlighted the upcoming challenges, stressing that there’s no straightforward solution available for the company to implement in this turnaround that would fully reassure her about the outcome.
Davis emphasized the importance of a turnaround in the firm’s patient-care business in the US, noting that competition from retail giants, grocers with pharmacies, and online drug delivery services poses significant threats.
Meanwhile, Evercore ISI analyst Elizabeth Anderson believes that improving US drugstores could boost the firm’s stock price by around 20% from current levels.
As Walgreens continues its $1 billion cost-cutting program and focuses on enhancing its US retail pharmacy business, the outcome of its strategic review remains uncertain, leaving investors with lingering doubts about the company’s future direction.
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