Walgreens gains as Deutsche Bank issues first Buy rating with Street high target
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Walgreens Boots Alliance (NASDAQ:WBA) added ~2% pre-market Friday after Deutsche Bank issued the first bullish rating on the pharmacy retailer, upgrading it to Buy from Hold with a Street high price target of $50.
The analyst George Hill attributes his decision to Walgreensâ (WBA) recently-announced decision to acquire the health care provider Summit Health through its majority-owned VillageMD business in a deal expected to close in Q1 2023.
The transaction will position Walgreens (WBA) via VillageMD as one of the âlargest investor-owned multi-payer primary care businessesâ in the U.S. behind UnitedHealth (UNH), with more than 700 locations generating $8B in revenue at the end of 2023, the analyst argued.
âWe fully acknowledge that the front-end and back-end pharmacy business are and likely remain challenged,â Hill wrote, adding, âyet with investor & sell-side sentiment so low (DB is the only Buy), we see a 2:1 positive risk/reward skew from here.â
Citing discussions with the management, the analyst notes Walgreensâ (WBA) plans to pivot from a pharmacy-led healthcare business to a consumer healthcare services company with broader ambitions where its pharmacy business will play a key role.
âIf mgmt. can execute on its strategy, we see both upside to street numbers and multiple revisions,â Hill added.
The upgrade comes at a time when Walgreens (WBA) has underperformed its rival CVS Health (CVS) and the broader market this year with a ~27% decline, as indicated in this graph.