Walgreens only recently introduced its FY Q1 2021 earnings. The inventory fell on the information regardless that Walgreens beat analysts’ expectations. It additionally raised its revenue projections for your entire 12 months. On the again of this excellent news, many traders are taking one other take a look at Walgreens inventory.
Proper now, there are a number of causes to be enthusiastic about drugstores normally. Over the previous 2-3 years, there have been extra causes than regular to go to one. Primarily, to get a COVID-19 shot, testing package, or a facemask. For higher or worse, COVID-19 has boosted foot visitors in America’s drugstores. Moreover, “America’s drugstores” actually solely refers to 2 corporations. The 2 main pharmacies within the U.S. are CVS and Walgreens. To a lesser extent, you’ve gotten Well being Mart, Ceremony Help and Good Neighbor Pharmacy. You additionally technically have Walmart, though that’s rather more than only a pharmacy.
With so many extra folks visiting drugstores, is that this a great time to spend money on Walgreens inventory? Or, is the surge of visitors lastly dying down? Let’s have a look and discover out.
Walgreens Inventory Forecast
What does Walgreens do?
Walgreens Boot Alliance is a holding firm that’s headquartered in Illinois. You in all probability acknowledge it from its two built-in pharmacies, Walgreens and Duane Reade. Daily, Walgreens helps tens of millions of individuals get entry to healthcare staples. It has about 13,000 places within the U.S., Europe, and Latin America. Nevertheless, the majority of its revenue comes from the U.S.
Walgreens can also be a member of the Dow Jones Industrial Common. Because of this it is among the thirty most vital corporations in the US.
Let’s check out what Walgreens has been as much as not too long ago.
Current Bulletins:
- Not too long ago declared a quarterly dividend of 47 cents per share.
- Started the method of promoting Boots Pharmacy division – This pharmacy primarily operates in Britain. It’s valued at US$9.6 billion.
- Final fall, Walgreens elevated its possession stake in VillageMD. This partnership will assist Walgreens carry full-service main care to clients. It’s the first pharmacy to place physicians and pharmacists underneath one roof.
Inventory Predictions
As talked about, Walgreens reported its earnings for FY Q1 2022. In excellent news, it beat analysts’ expectations. It additionally raised its steerage for the remainder of the 12 months. Listed here are just a few of the takeaways from the report:
- Complete gross sales of $33.9 billion, up 7.8% from final 12 months.
- Earnings per share of $4.13, up from -$0.45 from final 12 months.
- Working revenue of $1.3 billion. Up from a lack of $535 million final 12 months.
For the total FY 2021, Walgreens reported annual income of $132.51 billion, up 8% year-over-year (YOY). It additionally reported a web revenue of $2.54 billion, up 457% YOY.
CEO Rosalind Brewer believes that the corporate is “well-positioned for sustainable, long-term worth creation.” Extra not too long ago, Walgreens declared a quarterly dividend of 47 cents per share. This brings their dividend yield to three.84%.
It wasn’t all excellent news for Walgreens although. Based on CFO James Kehoe, the corporate is getting damage by the present labor scarcity. Transferring ahead, it would spend $120 million extra on wages. That is primarily to compete with different retailers in a decent labor market.
So, does this imply that it’s a great time to purchase Walgreens inventory? Let’s check out among the execs and cons of investing in Walgreens.
Ought to I Purchase Walgreens Inventory? Potential Upsides
Walgreens is undoubtedly making the most of the coronavirus pandemic. It advantages immediately from the sale of coronavirus-related merchandise. For instance, COVID-19 vaccines, face-masks and exams. Nevertheless, Walgreens additionally earnings not directly from the surge of individuals visiting its shops.
Identical-store retail gross sales elevated 10.6% from the earlier 12 months. That is the most important bounce in 20 years. It’s secure to imagine that this elevated foot visitors helps increase gross sales in different areas. For instance, extra folks than ever are visiting Walgreens places for covid-related merchandise. Nevertheless, whereas they’re there, these persons are additionally possible to purchase aspirin, tissues, and different merchandise.
All of that is excellent news for Walgreens. Nevertheless, from an investing perspective, any COVID-19 information will most definitely not affect the inventory vastly within the brief time period. That is primarily as a result of traders have recognized this info for some time. For the reason that begin of 2020, Walgreen’s inventory is down 15%. By this level, any excellent news from vaccine gross sales has been priced into the inventory. Elevated gross sales have additionally been offset by labor shortages and inflationary bills.
Want A Doc? Head To Walgreens!
In at the moment’s unstable market, making an attempt to take a position round COVID-19 information shouldn’t be probably the most dependable technique. With that stated, there are nonetheless loads of upsides to purchasing Walgreens inventory. Particularly, its funding in VillageMD is especially thrilling.
Proper now, pharmacies within the U.S. have develop into pretty interchangeable. There is likely to be gentle variations between CVS and Walgreens. However, for probably the most half, they provide the identical service. It’s robust to call any main merchandise that CVS sells that Walgreens doesn’t (and vice versa). Your choice on which to go to will in all probability come right down to which one is closest. With that stated, Walgreens’ funding in VillageMD may very well be the gamechanger that it wants.
In the US, primary-based service is a trillion-dollar market. It’s also the fastest-growing section of the healthcare business. With its funding in VillageMD, Walgreens desires to interrupt into this market. By 2021, it plans to function over 600 main care practices. By 2027, it plans to function 1,000. Many of those shall be in undeveloped areas.
This funding may permit Walgreens to faucet into a large new income stream. Primarily, folks with restricted entry to healthcare. By bringing new clients into the market, it would additionally arrange its pharmacies to develop into the de facto cease to select up prescriptions. On prime of all this, Waglreens is condensing the healthcare course of. Now, customers can go to a health care provider and decide up prescribed medicine multi function go to.
This may occasionally sound like a small tweak to most individuals’s healthcare routine. Nevertheless, it may find yourself being a giant motive to personal Walgreens inventory over the approaching years.
So what in regards to the main downsides of proudly owning Walgreens inventory?
Ought to I Purchase Walgreens Inventory? Potential Downsides
Walgreens inventory is down nearly 40% prior to now 5 years. For comparability, rival CVS is up about the identical quantity. In reality, since 2010 Walgreens inventory is up solely 30%. Even throughout its greatest run-up of the last decade, it solely rose 160%. For no matter motive, this inventory simply doesn’t transfer a lot. Subsequently, the most important draw back to proudly owning Walgreens inventory is the chance price. By this, I imply that your cash may very well be producing a a lot larger return elsewhere.
There are such a lot of new and thrilling locations to place your cash. For instance, some cryptocurrencies and NFTsgenerate weekly returns that rival Walgreens’ decade return. If these sound too dangerous, there are nonetheless loads of development shares to contemplate. Or, you can spend money on a large pattern such because the metaverse.
You might even simply spend money on an exchange-traded fund. This can be a very secure option to let your cash persistently develop. For instance, you can purchase a fund that tracks the Nasdaq or S&P 500. Over the previous 5 years, these indexes have returned 149% and 98% respectively. Each of those funds have vastly outperformed Walgreens. You might even spend money on the Dow Jones, of which Walgreens is a member.
On the finish of the day, there actually isn’t any “proper” or “mistaken” reply. It simply comes right down to what your objectives are as an investor. Walgreens pays a large dividend and is a reasonably steady inventory. This may attraction to a number of traders. Nevertheless, it doesn’t have a historical past of huge development which in all probability discourages a number of traders. t all relies on what you might be searching for.
I hope that you simply’ve discovered this Walgreens inventory forecast to be invaluable! As regular, please base all funding choices by yourself due diligence and threat tolerance.
About Teddy Stavetski
A College of Miami grad, Teddy studied advertising and finance whereas additionally taking part in 4 years on the soccer crew. He’s all the time had a ardour for enterprise and used his expertise from just a few private tasks to develop into one of many top-rated enterprise writers on Fiverr.com. When he’s not hammering phrases onto paper, you’ll find him hammering notes on the piano or touring to some place random.