Shares of Walgreens Boots Alliance (WBA) started Monday morning trading strong with a 3% gain thus far. The stock has been battered in both the short and long term, but there is hope that new CEO Tim Wentworth will turn things around for the company.
According to Lisa Gill, analyst at J.P. Morgan, today marks a new beginning for the healthcare and pharmacy chain. While there is certainly a large hole to climb out of, the revitalized management team is poised to remove the overhangs that have held the stock back. Gill also notes that, in saying this, the bar is very low for this stock.
Tim Wentworth was the previous CEO of Evernorth – the health services division of Cigna Group. He’s replacing Rosalind Brewer, who is stepping down after just over 2 years in the position.
Brewer watched the stock lose half its value during her tenure – but, to be fair, she came in to pick up the broken pieces herself. The stock has lost more than 71% of its value in the past 5 years. In fact, the stock just hit a 25-year low of $20.48 last week.
The company has fallen short of expectations in consecutive earnings – which can largely be attributed to rising costs and a dramatic drop off in COVID-19 vaccinations. Meanwhile, Walgreens’ healthcare business is taking a bit longer to ramp up than anticipated.
But after losing so much of its value, Gill believes the stock now sits at a favorable risk/reward ratio given today’s low price. And, given that Wentworth and the team are well-versed in overcoming short-term hurdles, she is bullish on this stock. She’s not the only one, either. 4 of the 11 analysts polled have taken a bullish outlook.
That being said, should you buy WBA as the stock sits at a steep discount to where it once was? Or, should you hold off a bit to see what Wentworth does in the foreseeable future?
You don’t have to play the guessing game or let emotion influence your decision-making. We’ve uncovered a few reasons to stay away from this stock using the VectorVest stock analyzer – see what we found below…
Despite Very Good Upside Potential, WAB Has Poor Safety and Timing
The VectorVest system simplifies your trading strategy by giving you clear, actionable insights in 3 simple ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).
Each sits on a scale of 0.00-2.00 with 1.00 being the average. Based on the overall VST rating for a given stock, you’re given a clear buy, sell, or hold recommendation at any given time. As for WBA, here’s what we found:
- Vert Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out) to AAA corporate bond rates and risk. As for WBA, the RV rating of 1.37 is very good. Further to that point, the stock is undervalued as Gill suggested - with a current value of $28.49/share.
- Poor Safety: The RS rating is an indicator of risk that comes from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. WBA has a poor RS rating of 0.76 - which speaks to multiple poor earnings reports in a row.
- Poor Timing: You don’t want to try and catch a falling knife - and there is no guarantee that WBA has reached its bottom just yet. In fact, the RT rating of 0.60 suggests that the stock still has a strong negative price trend holding it back. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 0.93 is slightly below the average but deemed fair nonetheless. That being said, VectorVest has placed a sell rating on this stock for the time being.
You can learn more about WBA or the VV system itself through a free stock analysis - transform your approach to stock analysis today and win more trades with less work!
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VectorVest advocates buying safe, undervalued stocks, rising in price. Despite the buzz this morning surrounding Walgreens’ new CEO coupled with very good upside potential, WBA has poor safety and timing holding it back - which is why it’s rated a SELL by VectorVest.
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