Walgreens stock price forecast: is it too cheap or a value trap?
Walgreens Boots Alliance (NYSE: WBA) stock price has become a toxic wasteland. It crashed to a low of $17 on Wednesday, much lower than its all-time high of $71.50, a 76% plunge.
Walgreens has lost $85 billion in value
Its market cap has plummeted from over $100 billion to about $15 billion, a move that has left it severely undervalued. Data by SeekingAlpha shows that the company spots a forward PE ratio of 5.50, which is lower than its five-year average of 8.46 and the sector median of 5.49.
Walgreens Boots Alliance is not the only pharmaceutical company that is struggling. Earlier this week, Walmart announced that it was closing its health centers as costs remained at an elevated level. It had about 51 stores and was planning to open 75 more.
Similarly, CVS published weak financial results on Wednesday, leading to a 13% crash in its stock. It was the second straight quarter that CVS downgraded its forward guidance. Like Walmart, the company cited higher medical costs in its Medicare insurance business.
Walgreen’s revenue has grown steadily in the past few years. Its annual revenue rose from over $120 billion in 2019 to $144.6 billion in the trailing twelve months. It made $139 billion in the last financial year.
However, its costs have become a big challenge, leading to profitability issues. It moved from a net profit of over $3.9 billion in 2019 billion to a net loss of over $3 billion loss in the last financial year. Its loss in the trailing twelve months soared to over $6 billion.
The most recent loss was because of an impairment charge in its VillageMD business. VillageMD, which was Walgreens’s strategy to grow its business announced plans to shutter its 160 clinics as it focused on dense cities.
Therefore, there is a likelihood that the company will continue struggling ahead of its next financial results, which are set for June 27th. Analysts expect its revenues will come in at over $35 billion down from $37 billion in the prior quarter.
Walgreens stock price forecast
Turning to the weekly chart, we see that the WBA share price has been in a strong bearish trend after peaking at $71.50 in 2015. The stock crashed below the crucial support level at $27.66, its lowest point in October 2022 and 2021.It was also the lower side of the inverse cup and handle pattern.
Walgreens stock has constantly dropped below the 50-week Exponential Moving Average. Most recently, it has plunged below the important support at $19.64, its lowest level in June 2012.
The Relative Strength Index (RSI) is nearing the oversold level at 30. Therefore, based on trend following principles, there is a likelihood that the stock will continue falling as sellers target the key support at $15.
The post Walgreens stock price forecast: is it too cheap or a value trap? appeared first on Invezz
