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Walgreens Faces Turbulence: Is It Time to Hold Steady or Make a Move?

Matt MonacoAvatar
Written by Matt Monaco
Reviewed by Jack Kellogg Fact-checked by Tim Sykes

Walgreens Boots Alliance Inc. faces a turbulent market as major labor strikes hit pivotal drug chains, raising operational concerns and likely contributing to market volatility. On Friday, Walgreens Boots Alliance Inc.’s stocks have been trading down by -10.75 percent.

Snapshot Summary

  • Investors worried about Sycamore Partners’ potential buyout of Walgreens Boots Alliance; uncertainties keep them at bay.
  • A dip of 1.2 percent recorded for Walgreens stock, marking the steepest decline on the S&P 500 recently.
  • HSBC revised Walgreens’ price target upward, from $7.60 to $10, maintaining a ‘reduce’ rating amid market fluctuations.

Candlestick Chart

Live Update At 17:20:48 EST: On Friday, January 17, 2025 Walgreens Boots Alliance Inc. stock [NASDAQ: WBA] is trending down by -10.75%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Latest Financial Performance

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As the curtain lifted on Walgreens Boots Alliance’s latest earnings performance, the numbers spoke volumes. With total revenue standing at $39.45 billion and operating revenue reflecting the same, the financial image was a mix of ups and downs. Despite sizable revenue, a net loss of $265 million related to ongoing expenses paints a complicated picture. Earnings per share are resting at -0.31, indicating the hurdles Walgreens must navigate in the near future.

Interestingly, while operating income tottered around a negative $245 million, the firm managed to maintain a positive gross profit figure of $6.779 billion. These balances demonstrate Walgreens’ costly endeavor to stabilize and perhaps, illustrate an impending financial turnaround after a period of recalibration.

More Breaking News

In terms of balance sheets, total assets reached an imposing $78.54 billion. Trout has jumped into this stream with questions, though, as total liabilities, pushing $67.27 billion, reveal a substantial see-saw of debts against assets. Still, the cash and cash equivalents at $859 million illustrate liquidity traces that linger with held promises.

Insights from Key Ratios

Delving deeper into Walgreens’ vitals, the financial ratios perhaps highlight the tempest in their financial waters. The profitability ratios tell a stern story. The company’s EBIT margin and profit margin stand at -9.2 and -10.49, respectively, indicating a potentially challenging path to profit on their present course. However, the gross margin at 17.6 percent marks available padding, hinting at cost management opportunities.

As we step onto the valuation floor, the numbers are mixed once again. The price-to-book ratio pegging at 1.12 and an enterprise value of around $40.69 billion suggest Walgreens’ market positioning is still attractive. Yet, the turbulence in the price-to-cash-flow ratio at -20 raises eyebrows, questioning liquidity and future cash generation abilities.

Moving onto financial fortitude metrics, the company’s total debt-to-equity sits at an alarming 3.09. This pointed concern spotlights potential stress lines as the leadership team navigates through rough economic environments, aiming to maintain equal strides with their peers.

Concern Over Walgreens Acquisition

Sycamore Partners’ interest in acquiring Walgreens has sparked more questions than enthusiasm among investors. Despite prior rumblings of acquisition talks, palpable uncertainty hangs over these negotiations – making folks step back on stock considerations. Concerns linger as UBS briefly touches upon Walgreens’ current cash flow predicaments, which may not favor traditional leveraged buyout approaches that many predicted.

The backdrop of these acquisition discussions maintains shadows cast over all upcoming fiscal aspirations. With UBS adjusting their earnings per share forecast downwards and reiterating COVID stressors, investors remain on edge as this acquisition narrative develops further.

Market Implications of Stock Movement

The S&P 500 spotlight saw Walgreens marked with a steep, sudden plunge of stocks late December, catching the attention of watchful investors. The decline painted a vivid reminder of the volatility dynamics, both in anticipation and reaction to events such as rumored mergers or acquisitions. As short-term movements capture imaginations, expectations pivot swiftly, resulting in sizable investor actions.

Moreover, as HSBC raises Walgreens’ projected stock target to $10, shareholders face new reasoning puzzles. The raise may symbol characterizes potential recovery and autonomy. The ‘reduce’ rating, however, throws in a necessary cautionary tale, nudging investors to weigh pragmatism over whimsical stock bets.

Conclusion: Strategies Surveyed

In essence, ongoing Walgreens dynamics echo a larger financial theater where outcomes waver between profitable opportunities and potential losses. Each player – from traders contemplating their positions to analysts enunciating caution – plays a role in the unfolding drama seen on Wall Street for Walgreens Boots Alliance. As millionaire penny stock trader and teacher Tim Sykes says, “Preparation plus patience leads to big profits.” This wisdom rings true as the speculative acquisition saga with Sycamore, updated market evaluations, and real-time reactions together make for a compelling story. The final chorus awaits for traders and market watchers to either hold steady or make informed strategic moves amidst these market-changing waves.

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”